There is no doubt that the increases in mortgage rates have slowed down the housing market over the last six months, but it’s not even close to what occurred in 2008. The inventory accumulation back then was 10.4 months (MLS stats) whereas currently, it is 3.2 months. So bubbles in inventories generally cause prices to go down as supply becomes greater than demand (the typical supply/demand economics) and competition among sellers becomes heightened, which leads to lower prices.
Currently, we have much higher prices and interest rates so the prospect of becoming a homeowner has faded for so many. The lines at open houses are gone and offer at asking prices and above are gone. Properties are still selling, however, and although prices are moderating, they are still holding — again due to a lack of inventory and still some competition.
The fact that the current market doesn’t resemble 2008 means that your asking price has to be close to what has sold over the last few months and not go as far back as six months when rates were lower and selling prices were higher. You must do your research in advance of considering whether to sell on your own or list with a reliable and professional Realtor who will do the necessary homework.
Banks are being more conservative with their appraisals in the prelude to mortgage approval. Because of the very lax lending that occurred in 2008, leading to the Dodd-Frank legislation, lending requirements today are more carefully structured to make sure buyers are adequately qualified. But there are low down payment loans to those who meet the FHA requirements, and rates for a 30-year fixed mortgage as of Nov. 13 were 6.96% and the refinance rate was 6.93%. It is still a much more expensive undertaking than a year ago.
However, the full documentation loans with 7% rates today are the same 7% rates with more flexible requirements as in 1996. But home prices were one-third to one-half the cost of today back then and based on income much more affordable to finance. Salaries and incomes have not necessarily kept up with the current housing costs, so the 7% rate today costs much more per month. Inventories will take many years to become normalized, so choices will be limited for many years.
Mortgage rates generally decrease as recessions become stronger. For many buyers, it may pay to wait, but for those who really need or want to buy or sell, there are creative ways to accomplish this. I have a few ideas based on my experiences this year that enabled buyers, who thought they couldn’t buy to become homeowners. There is a way to attain a mortgage at lower than current rates. Thinking outside the box can create situations that become a win/win for both buyer and seller.
With the escalating prices of rentals over the last few years and the reduction in building your wealth and zero tax deductions, buying can still make sense. Having a beneficial strategy will assist you in your path to homeownership. Gaining equity in becoming an owner to help grow your net worth over the long term will surely be more to your advantage than giving it away to a landlord. We can help you in your search if you have an open mind with flexibility.
Sellers would rather consider cash buyers who will have a slight advantage as their purchase will not be subject to an appraisal and may conceivably close quicker. However, today it is considered normal to have the purchase subject to an inspection. Today, sellers would most likely want a cash purchase to have a smoother sale with the least amount of glitches to occur.
Over the last 30 years, prices have increased an average of 290% nationwide. This isn’t to say the same will occur over the next 30 years, but many times history does repeat itself. Locally the lack of buildable land and housing inventory should keep prices on a more solid ground compared to other areas throughout the United States.
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