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Sense and Seasonality: What prospective buyers should know about the US housing market

By
Real Estate Agent with PHP Houses SL3302417

Buying a home is exciting and a major investment piece to your portfolio. Together with Rocket Mortgage, Sherwood explores the new changes to buying a home and long-term trends of the housing market, equipping prospective buyers with actionable insights to take control of their home buying journey.

Sherwood Studios 5/13/24 
 

“Choose your realtor wisely”. 

“Never, ever become friends with the sellers”. 

“Don't buy your first home with the intention of securing your dream home”. 

In a round-up of tips from homeowners who have seen it all, this much is clear: first-time buyers have a lot to learn, and a lot to consider. There’s no straight path. Buying a home is a unique experience for everyone — an exciting milestone, and for most, a huge investment.

While trends in the housing market come and go, some things remain constant. First things first: buying a home is an investment in your personal life as much as your financial wellbeing, and factors outside of the market are just as important to consider. A timeline for home buying should ultimately be dictated by personal aspirations and finances — and in that category, the primacy of a good credit score, stable income and sufficient down payment is something that never waivers.

In the market itself, there are trends that endure as permanent features of the US homebuying landscape. For first-time or experienced buyers, understanding these dynamics can at least make the process run more smoothly — or at best, save thousands of dollars down the line. It’s worth learning how these might affect your standing as a buyer and future homeowner. But first: what are the recent market impulses to be aware of?

What’s new in housing?

Like so many others, the mechanics of the US housing market and home buying process have been indelibly marked by developments in tech. Buyers can expect to have a lot more info about any property they’re interested in, from market analysis to neighborhood insights. Realtors know this, and buyers can afford to ask more of them as a result. 

On that front, a recent court settlement involving the National Association of Realtors is also set to shift the norm around agents’ fees. Decades-old rules have meant that sellers listing on any NAR-affiliated database can make offers of compensation for buyers’ agents, known in the industry as ‘cooperative compensation’. In practice, this means that sellers typically cover the commission (usually 5-6% of the home’s price) which is split between the buyer's and seller’s agent. The new settlement, however, disallows sellers’ agents from making commission offers on NAR-affiliated list sites, blocking these types of cooperative compensation offers.

So how is that good news for prospective homeowners? It does, of course, represent a saving for the seller and an incurred fee for the buyer — but with good reason. It leaves buyers in control of their own commission arrangements and should prevent realtors from prioritizing homes with the most competitive compensation offers. And as the NYT observed, for some industry analysts, the ruling could produce a ripple effect across the market that “eventually force[s] down home prices as a result.”

When it comes to the all-important mortgage question, first-time buyers also have more options than ever, as traditional routes evolve to accommodate the diverse needs of buyers. FHA and VA loans are two government-backed options that can help bring down the cost of a down payment, while innovative financing options such as shared equity programs and rent-to-own arrangements are two of the more accessible routes into home ownership.

The changing tides of the housing market aren’t restricted to inflation and interest rates. Ultimately, prospective buyers who stay abreast of developments may have more levers to pull to on their home buying journey. Fortunately, there are also some mainstays in market trends that have the weight of history behind them. Seasonality is the place to start.

Long-term trends: Seasonality 

The housing market changes with the seasons. It’s a simple supply-and-demand paradigm: for many, the weather, the school season, and the holidays make the summer months a more convenient and attractive time to buy. House sales and prices therefore reflect market activity peaking in the months April through June, where house prices rise by 16%. The market tends to slow by October, hitting its lowest activity through the winter months of December to February, per NAR data.

For buyers, it follows that the ideal time to buy are the off-season months when demand is lower. While this isn’t possible for every situation, it’s something to keep in mind if your timeline is flexible, since a quieter market hands buyers more bargaining power and less competition for homes. This could translate as estimated savings of 5-10% on the price of a property.

An important caveat is that market seasonality has a regional slant, with some areas more heavily affected than others. The Midwest region experiences the brunt of seasonal fluctuations, where daily June sales are double that of January. By contrast, the West and Northeast regions see a less pronounced uptick in sales through the spring and summer months of the year.

An understanding of market seasonality in the relevant region is a tool for buyers to keep in their arsenal. Importantly, if your timeline is flexible, you’ll want to ensure your realtor pulls the levers around seasonality in order to maximize savings.

Long-term trends: Home value appreciation 

History tells us that homes have withstood economic windfalls. Today, house price appreciation is a constant of the US market, and real estate is widely seen as a reliable asset. 

With the exception of the post-crash period between 2008 and 2012, homes have consistently increased in value since 1992, with the most recent data from December 2023 showing 6.4% YoY growth, per CEIC data. Buyers in today’s market therefore stand to gain a strategic investment as well as a personal possession, by seizing the opportunity to build equity as the property's value appreciates.

Considered in view of a wider investment portfolio, a home can enhance diversification and help to reduce overall risk. With house prices showing a strong historic trend of appreciation, a home is a robust counterpart to other investment classes. Unlike stocks and bonds, which may be subject to market volatility and economic downturns, real estate investments have historically shown lower correlation with traditional financial assets. 

Building equity in a home is also a route into greater financial flexibility. Home equity can be leveraged in a number of ways when you need to access funds quickly, such as home equity loans, a home equity line of credit (HELOC)* or a cash-out refinance. These are commonly used for debt consolidation or home remodeling — which is a way to leverage home equity that reinvests back into the property’s value. This can potentially add to the value appreciation your home is likely to gain over time. Plus, the interest on home equity loans used for renovations may be deductible from your income tax return — another way buyers can draw greater financial flexibility from home ownership.

For all its whims, the market has consistently trended towards home value appreciation, and the status of a house as a reliable capital asset is widely acknowledged. Leveraged well, a home purchase is a very real opportunity for wealth building and equity growth. Prospective buyers can draw confidence from the fact that, long-term, home ownership is a strategic financial move.

Brick-by-brick: The home buying opportunity   

Equipped with the right knowledge and professional advice, prospective buyers can open doors to their financial futures and take control in the home buying process. While the market ebbs and flows, there are both enduring features and new developments that spell opportunity for first-time buyers. Staying on top of updates and learning how to work the market for your particular set of circumstances is key — and so is selecting the right industry professionals to help you on your way. Ultimately, a realtor or broker who deeply understands your market can make all the difference.

For most, it starts with a mortgage. As America’s largest mortgage lender with 90% of clients willing to recommend them**, Rocket Mortgage is a leading option. Whether you want to purchase a new home or refinance an existing mortgage, they’ve got experts on hand 24/7 to fuel you with confidence throughout the process — and they’ll still be there for you as you repay.

Rocket knows it’s a tough climate… which is why they’re offering Sherwood readers lender credit of $1,000*** when they lock in a loan using this link. If 2024 is your year, let Rocket show you what’s possible. Start an application today.

©2000-2024 Rocket Mortgage, LLC. All rights reserved. Lending services provided by Rocket Mortgage, LLC. NMLS #3030; www.NMLSConsumerAccess.org. Equal Housing Lender. Licensed in 50 states. For additional information please visit rocketmortgage.com/legal/disclosures-licenses.

 

Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 641-1531
Fax: (407) 205-1951
email: info@phphouses.com

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The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. The author does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. The author will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.
George Souto
George Souto NMLS #65149 - Middletown, CT
Your Connecticut Mortgage Expert

Walter DiLoreto normally the Spring Market is our busiest season, but with the very low inventory we have had the last 3-4 years, there has not been much of a change from season to season.

May 28, 2024 07:56 AM