by John Nyiszter | Mar 4, 2024 | condos, First Time Home Buyers, FSBO, Home Owners, Home Sellers, investment properties, luxury homes, townhome owners, Uncategorized
If you’re planning to buy your first home, saving up for all the costs involved can feel daunting, especially when it comes to the down payment. That might be because you’ve heard you need to save 20% of the home’s price to put down. Well, that isn’t necessarily the case.
Unless specified by your loan type or lender, it’s typically not required to put 20% down. That means you could be closer to your homebuying dream than you realize.
As The Mortgage Reports says:
“Although putting down 20% to avoid mortgage insurance is wise if affordable, it’s a myth that this is always necessary. In fact, most people opt for a much lower down payment.”
According to the National Association of Realtors (NAR), the median down payment hasn’t been over 20% since 2005. In fact, for all homebuyers today it’s only 15%. And it’s even lower for first-time homebuyers at just 8% (see graph below):
The big takeaway? You may not need to save as much as you originally thought.
Learn About Resources That Can Help You Toward Your Goal
According to Down Payment Resource, there are also over 2,000 homebuyer assistance programs in the U.S., and many of them are intended to help with down payments.
Plus, there are loan options that can help too. For example, FHA loans offer down payments as low as 3.5%, while VA and USDA loans have no down payment requirements for qualified applicants.
With so many resources available to help with your down payment, the best way to find what you qualify for is by consulting with your loan officer or broker. They know about local grants and loan programs that may help you out.
Don’t let the misconception that you have to have 20% saved up hold you back. If you’re ready to become a homeowner, lean on the professionals to find resources that can help you make your dreams a reality. If you put your plans on hold until you’ve saved up 20%, it may actually cost you in the long run. According to U.S. Bank:
“. . . there are plenty of reasons why it might not be possible. For some, waiting to save up 20% for a down payment may “cost” too much time. While you’re saving for your down payment and paying rent, the price of your future home may go up.”
Home prices are expected to keep appreciating over the next 5 years – meaning your future home will likely go up in price the longer you wait. If you’re able to use these resources to buy now, that future price growth will help you build equity, rather than cost you more.
Bottom Line
Keep in mind that you don’t always need a 20% down payment to buy a home. If you’re looking to make a move this year, let’s connect to start the conversation about your homebuying goals.
by John Nyiszter | Feb 29, 2024 | condo owners, condos, First Time Home Buyers, FSBO, Home Owners, Home Sellers, investment properties, luxury homes, townhome owners, Uncategorized
Over the past few months, experts have revised their 2024 home price forecasts based on the latest data and market signals, and they’re even more confident prices will rise, not fall.
So, let’s see exactly how experts’ thinking has shifted – and what’s caused the change.
2024 Home Price Forecasts: Then and Now
The chart below shows what seven expert organizations think will happen to home prices in 2024. It compares their first 2024 home price forecasts (made at the end of 2023) with their newest projections:
The middle column shows that, at first, these experts thought home prices would only go up a little this year. But if you look at the column on the right, you’ll see they’ve all updated their forecasts and now think prices will go up more than they originally thought. And some of the differences are major.
There are two big factors keeping such strong upward pressure on home prices. The first is how few homes are for sale right now. According to Business Insider:
“Low home inventory is a chronic problem in the US. This has generally kept home prices up . . .”
A lack of housing inventory has been pushing prices up for a long time now – and that’s not expected to change dramatically this year. But what has changed a bit is mortgage rates.
Late last year when most housing market experts were calling for home prices to rise only a little bit in 2024, mortgage rates were up and buyer demand was more moderate.
Now that rates have come down from their peak last October, and with further declines expected over the course of the year, buyer demand has picked up. That increase in demand, along with an ongoing lack of inventory, is what’s caused the experts to feel the upward pressure on prices will be stronger than they expected a couple months ago.
A Look Forward To Get Ahead of the Next Forecast Revisions
Real estate experts regularly revise their home price forecasts as the housing market shifts. It’s a normal part of their job that ensures their projections are always up-to-date and factor in the latest changes in the housing market.
That means they’ll continue to revise their projections as the housing market changes, just as they’ve always done. How those forecasts change next is anyone’s guess, but pay attention to mortgage rates.
If they trend down as the year goes on, as they’re expected to do, that could lead to more buyer demand and even higher home price forecasts.
Basically, it’s all about supply and demand. With supply still so limited, anything that causes demand to go up will likely cause prices to go up, too.
Bottom Line
At first, experts believed home prices would only go up a little this year. But now, they’ve changed their minds and forecast prices will grow even more than they originally thought. Let’s connect so you know what to expect with prices in our area.
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by John Nyiszter | Feb 29, 2024 | condo owners, condos, First Time Home Buyers, FSBO, Home Owners, Home Sellers, investment properties, luxury homes, townhome owners, Uncategorized
If you’re holding out hope that the housing market is going to crash and bring home prices back down, here’s a look at what the data shows. And spoiler alert: that’s not in the cards. Instead, experts say home prices are going to keep going up.
Today’s market is very different than it was before the housing crash in 2008. Here’s why.
It’s Harder To Get a Loan Now – and That’s Actually a Good Thing
It was much easier to get a home loan during the lead-up to the 2008 housing crisis than it is today. Back then, banks had different lending standards, making it easy for just about anyone to qualify for a home loan or refinance an existing one.
Things are different today. Homebuyers face increasingly higher standards from mortgage companies. The graph below uses data from the Mortgage Bankers Association (MBA) to show this difference. The lower the number, the harder it is to get a mortgage. The higher the number, the easier it is:
The peak in the graph shows that, back then, lending standards weren’t as strict as they are now. That means lending institutions took on much greater risk in both the person and the mortgage products offered around the crash. That led to mass defaults and a flood of foreclosures coming onto the market.
There Are Far Fewer Homes for Sale Today, so Prices Won’t Crash
Because there were too many homes for sale during the housing crisis (many of which were short sales and foreclosures), that caused home prices to fall dramatically. But today, there’s an inventory shortage – not a surplus.
The graph below uses data from the National Association of Realtors (NAR) and the Federal Reserve to show how the months’ supply of homes available now (shown in blue) compares to the crash (shown in red):
Today, unsold inventory sits at just a 3.0-months’ supply. That’s compared to the peak of 10.4 month’s supply back in 2008. That means there’s nowhere near enough inventory on the market for home prices to come crashing down like they did back then.
People Are Not Using Their Homes as ATMs Like They Did in the Early 2000s
Back in the lead up to the housing crash, many homeowners were borrowing against the equity in their homes to finance new cars, boats, and vacations. So, when prices started to fall, as inventory rose too high, many of those homeowners found themselves underwater.
But today, homeowners are a lot more cautious. Even though prices have skyrocketed in the past few years, homeowners aren’t tapping into their equity the way they did back then.
Black Knight reports that tappable equity (the amount of equity available for homeowners to access before hitting a maximum 80% loan-to-value ratio, or LTV) has actually reached an all-time high:
That means, as a whole, homeowners have more equity available than ever before. And that’s great. Homeowners are in a much stronger position today than in the early 2000s. That same report from Black Knight goes on to explain:
“Only 1.1% of mortgage holders (582K) ended the year underwater, down from 1.5% (807K) at this time last year.”
And since homeowners are on more solid footing today, they’ll have options to avoid foreclosure. That limits the number of distressed properties coming onto the market. And without a flood of inventory, prices won’t come tumbling down.
Bottom Line
While you may be hoping for something that brings prices down, that’s not what the data tells us is going to happen. The most current research clearly shows that today’s market is nothing like it was last time.
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by jnyiszter | Oct 12, 2022 | baby boomers, condo owners, condos, First Time Home Buyers, FSBO, gen z, Generation X, home buyers, Home Owners, Home Sellers, investment properties, luxury homes, millennials, property owners, townhome owners, townhomes, Uncategorized
The Cost of Waiting for Mortgage Rates To Go Down
Mortgage rates have increased significantly in recent weeks. And that may mean you have questions about what this means for you if you’re planning to buy a home. Here’s some information that can help you make an informed decision when you set your homebuying plans.
The Impact of Rising Mortgage Rates
As mortgage rates rise, they impact your purchasing power by raising the cost of buying a home and limiting how much you can comfortably afford. Here’s how it works.
Let’s assume you want to buy a $400,000 home (the median-priced home according to the National Association of Realtors is $389,500). If you’re trying to shop at that price point and keep your monthly payment about $2,500-2,600 or below, here’s how your purchasing power can change as mortgage rates climb (see chart below). The red shows payments above that threshold and the green indicates a payment within your target range.
As the chart shows, as rates go up, the amount you can afford to borrow decreases and that may mean you have to look at homes at a different price point. That’s why it’s important to work with a real estate advisor to understand how mortgage rates impact your monthly mortgage payment at various home loan amounts.
Are Mortgage Rates Going To Go Down?
The rise in mortgage rates and the resulting decrease in purchasing power may leave you wondering if you should wait for rates to go down before making your purchase. Realtor.com says this about where rates could go from here:
“Many homebuyers likely winced . . . upon hearing that the Federal Reserve yet again boosted its short-term interest rates by three-quarters of a percentage point—a move that’s pushing mortgage rates through the roof. And the already high rates are just going to get higher.”
So, if you’re waiting for mortgage rates to drop, you may be waiting for a while as the Federal Reserve works to get inflation under control.
And if you’re considering renting as your alternative while you wait it out, remember that’s going to get more expensive with time too. As Nadia Evangelou, Senior Economist and Director of Forecasting at the National Association of Realtors (NAR), says:
“There is no doubt that these higher rates hurt housing affordability. Nevertheless, apart from borrowing costs, rents additionally rose at their highest pace in nearly four decades.”
Basically, it is true that it costs more to buy a home today than it did last year, but the same is true for renting. This means, either way, you’re going to be paying more. The difference is, with homeownership, you’re also gaining equity over time which will help grow your net worth. The question now becomes: what makes more sense for you?
Bottom Line
Each person’s situation is unique. To make the best decision for you, let’s connect to explore your options.
by jnyiszter | Oct 12, 2022 | baby boomers, condo owners, condos, First Time Home Buyers, FSBO, gen z, Generation X, home buyers, Home Owners, Home Sellers, investment properties, luxury homes, millennials, property owners, townhome owners, townhomes, Uncategorized
Saving for a Down Payment? Here’s What You Should Know.
As you set out to buy a home, saving for a down payment is likely top of mind. But you may still have questions about the process, including how much to save and where to start.
If that sounds like you, your down payment could be more in reach than you originally thought. Here’s why.
The 20% Down Payment Myth
If you believe you have to put 20% down on a home, you may have based your goal on a common misconception. Freddie Mac explains:
“. . . nearly a third of prospective homebuyers think they need a down payment of 20% or more to buy a home. This myth remains one of the largest perceived barriers to achieving homeownership.”
Unless it’s specified by your loan type or lender, it’s typically not required to put 20% down. According to the latest Profile of Home Buyers and Sellers from the National Association of Realtors (NAR), the median down payment hasn’t been over 20% since 2005. There are even loan types, like FHA loans, with down payments as low as 3.5%, as well as options like VA loans and USDA loans with no down payment requirements for qualified applicants.
This is good news for you because it means you could be closer to your homebuying dream than you realize. For more information, turn to a trusted lender.
Down Payment Assistance Programs Can Be a Game Changer
A professional will be able to show you other options that could help you get closer to your down payment goal. According to latest Homeownership Program Index from downpaymentresource.com, there are over 2,000 homebuyer assistance programs in the U.S., and the majority are intended to help with down payments.
A recent article explains why programs like these are helpful:
“These resources can immediately build your home buying power and help you take action sooner than you thought possible.”
And if you’re wondering if you have to be a first-time buyer to qualify for these programs, that’s not always the case. According to an article from downpaymentresource.com:
“It is a common misconception that homebuyer assistance is only available to first-time homebuyers, however, 38% of homebuyer assistance programs in Q1 2022 did not have a first-time homebuyer requirement.”
There are also location and profession-based programs you could qualify for as well.
Bottom Line
Saving for your down payment is an important first step on your homebuying journey. Let’s connect today and make sure you have a trusted lender to help explore your options.
