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Should I wait until spring 2022 to buy a house?

The mortgage interest rate is declining, housing prices are stable, and buyers have leverage over sellers. Fannie Mae released a nationwide housing survey for November 2022 that reveals only 16 percent of respondents believe it is a good time to buy a house in 2022, unchanged from October's survey. 6 days ago

noradarealestate.com - Is it a Good Time to Buy a House or Should I Wait Until 2023-2024

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Is it a Good Time to Buy a House or Should I Wait?

Check out the latest housing trends for the previous month if you're unsure whether it is a good time to buy a house or if should you wait until 2023. It’s becoming harder to buy a house as prices are up year over year, and mortgage rates are soaring in 2022. At the same time, consumer prices on everything are also on the rise making it even more difficult to save money to buy a house next year. In an effort to tamp down inflation, the Federal Reserve is raising interest rates. The Federal Reserve raised the target range for the federal funds rate by 75 bps to 3.75%-4% during its November 2022 meeting. It marks a sixth consecutive rate hike and the fourth straight three-quarter point increase, pushing borrowing costs to a new high since 2008. The decision came in line with market forecasts. Policymakers also said that ongoing increases in the target range will be appropriate and that they will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments when deciding on the size of further increases. The message could signal a smaller rate hike in December but during the press conference Chair Powell also noted the ultimate level of interest rates will be higher than previously expected. The Fed aims to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2%, which remains elevated around 40-year highs. The cumulative effect of these sharp rate increases has cooled the housing market and caused the economy to slow, but has done little to lower inflation. Although Fed doesn't control mortgage rates it has a ripple effect on the mortgage industry. The recent rate hike will correspond with a rise in the prime rate and immediately send financing costs higher for many forms of consumer borrowing. On the flip side, higher interest rates also mean savers will earn more money on their deposits.

Don’t expect much relief in the form of lower rates in the coming months. Therefore, it certainly does not seem to be a good time to buy a house as rates have risen much more rapidly in 2022 than most industry analysts and economists had initially predicted. But when it comes to the possibility of significant savings, looking for the best mortgage offer provides an outstanding return on investment. Because it only takes a little more effort to browse around for the greatest mortgage rate, why not take advantage of it?

<<< Will the Housing Market Crash? >>>

Is it a Good Time to Buy a House or Should I Wait?

Will the 2022 year-end be a good time to purchase your first house? The mortgage interest rate is declining, housing prices are stable, and buyers have leverage over sellers. Fannie Mae released a nationwide housing survey for November 2022 that reveals only 16 percent of respondents believe it is a good time to buy a house in 2022, unchanged from October's survey. “Both consumer homebuying and home-selling sentiment are significantly lower than they were last year, which, in our view, is unsurprising considering mortgage rates have more than doubled and home prices remain elevated,” said Doug Duncan, Fannie Mae Senior Vice President, and Chief Economist. The Home Purchase Sentiment Index® (HPSI) increased 0.6 points in November to 57.3, its first increase in nine months, though it remains just above the all-time low set last month and significantly lower than its level at this time last year. Four of the index’s six components increased modestly month over month, including those associated with homebuying and home-selling conditions; however, both remain well below year-ago levels, having declined on net 28 and 38 points, respectively.

Is it a Good Time to Buy a House?

The percentage of respondents who say it is a good time to buy a home remained unchanged at 16%, while the percentage who say it is a bad time to buy decreased from 80% to 79%. As a result, the net share of those who say it is a good time to buy increased 1 percentage point month over month.

Is it a Good Time to Sell a House?

The percentage of respondents who say it is a good time to sell a home increased from 51% to 54%, while the percentage who say it’s a bad time to sell decreased from 42% to 39%. As a result, the net share of those who say it is a good time to sell increased 6 percentage points month over month.

Home Price & Mortgage Rate Expectations

The percentage of respondents who say home prices will go up in the next 12 months remained unchanged at 30%, while the percentage who say home prices will go down decreased from 37% to 34%. The share who think home prices will stay the same increased from 26% to 30%. As a result, the net share of those who say home prices will go up increased 3 percentage points month over month. The percentage of respondents who say mortgage rates will go down in the next 12 months increased from 6% to 10%, while the percentage who expect mortgage rates to go up decreased from 65% to 62%. The share who think mortgage rates will stay the same remained unchanged at 24%. As a result, the net share of those who say mortgage rates will go down over the next 12 months increased 7 percentage points month over month. The HPSI is constructed from answers to six of 100 national housing survey questions that solicit consumers’ evaluations of housing market conditions and address topics that are related to their home purchase decisions. As of December 15, 2022, the average rate for the benchmark 30-year fixed mortgage is 6.60 percent (source: Bankrate). It is an increase of 8 basis points from a week ago. Last month on the 11th, the average rate on a 30-year fixed mortgage was higher, at 6.87 percent. At the current average rate, you’ll pay a combined $638.66 in principal and interest for every $100,000 you borrow to buy a house. That’s up $5.28 from what it would have been last week. The average 15-year fixed mortgage rate is 6.00 percent, up 9 basis points over the last week. At that rate, monthly payments on a 15-year fixed mortgage will be around $844 per $100,000 borrowed to buy a house. The larger monthly payment may be harder to fit into your budget than a 30-year mortgage payment, but it has huge advantages: You'll save several thousand dollars in interest and create equity much faster. Let's compare the figures between now and eleven months ago when the buyers financed their houses with a mortgage. On a $300,000 loan, a 30-year, fixed-rate mortgage at December 2021's rate of 3.11% would have meant a monthly payment of about $1,282 (Principal & interest).

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Loan amount = $300,000

Total interest paid = $161,923

Total cost of loan = $461,923

Today’s rate of 6.60% (30-year) brings the monthly payment to $1,915 (Principal & interest). That’s an extra $633 a month or $7,596 more a year and $228,578 more over the lifetime of the loan.

Loan amount = $300,000

Total interest paid = $390,501

Total cost of loan = $690,501

The Fannie Mae (FNMA/OTCQB) Economic and Strategic Research (ESR) Group revised downward its forecast for total home sales growth through 2023. They now project 2022 total year existing sales to decline 16.5 percent from 2021, followed by a further decline of 13.3 percent in 2023. Their forecast for 2022 purchase volumes remains at $1.7 trillion, essentially unchanged from last month. The group now expects purchase volumes to fall about 1.5 percent in 2023 to just under $1.7 trillion, a downward revision of $17 billion from last month’s forecast, driven by downward revisions to their forecast for home sales. The rise in rates is having the Fed’s desired effect on housing, as house price growth began to slow in June. They expect the slowdown in housing to continue through 2023 as affordability constraints mount for potential homebuyers, considering, too, that refinance activity has been significantly curtailed by the rise in mortgage rates. The group continues to anticipate a strong deceleration in home price growth going forward due to the lagged effects of higher mortgage rates and the slowing economy weighing on purchase demand. If the economy suffers a downturn, mortgage interest rates will very probably fall to about 4% or even lower. If it does, this could be a good time to put off buying a home and save some money, especially for first-time buyers. Fannie Mae forecasted at the start of the year that the average 30-year fixed mortgage rate will rise from 3.1% to 3.3% by the end of 2022. The Mortgage Bankers Association was somewhat more optimistic about mortgage rates, projecting that the average rate will increase to 4% by the end of 2022. It is now evident that neither Fannie Mae's nor the Mortgage Bankers Association's predictions were even somewhat accurate. The 30-year fixed mortgage rate, which hovered at 3% throughout 2021, is treading close to 7 percent, a steep increase from last year. It has almost doubled since last year. Some experts are forecasting that the 30-year, fixed-mortgage rate will vary from 5% to 7% by the end of 2022. According to Nadia Evangelou, director of Forecasting for the National Association of Realtors, rates may exceed 6 percent. They did momentarily before the Federal Reserve's June announcement of a rate rise, but have subsequently backed off. The most likely scenario is that the Fed will continue to raise the fed funds rate to combat inflation and will continue to reduce its position in the market for mortgage-backed securities. The Federal Reserve is expected to continue its course of raising short-term interest rates and anticipate an additional 75 basis point hike at its September meeting, though markets are partially pricing in the possibility of a full 100 basis point increase. As a buyer, you do not want to hear this because higher interest rates make home loans less affordable. Rising rates make homes more expensive for buyers, and, for prospective borrowers, steeper monthly mortgage payments. It will thereby reduce the demand for home purchases. The latest housing stats for August already point to an increasing inventory amidst moderating demand. The mortgage credit availability again decreased in August as investors reduced their offerings of ARM and non-QM loan programs. With the overall origination volume expected to shrink in 2022, some lenders continue to streamline their operations by dropping certain loan programs to simplify their offerings, according to the Mortgage Bankers Association. According to the latest data analysis from the Mortgage Bankers Association (MBA), mortgage credit availability rose in November 2022, according to the MBA's Mortgage Credit Availability Index (MCAI), a report that analyzes data from ICE Mortgage Technology. The MCAI rose by 1.4% to 103.4 in November. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. It was the first increase in nine months. Jumbo credit availability saw a 4% increase, as jumbo rates remained more competitive than rates on conforming loans and most of last month’s increase came from more ARM loan programs being offered. The MCAI fell by 0.5 percent to 108.3 in August. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. The index was benchmarked to 100 in March 2012. The Conventional MCAI decreased by 1.0 percent, while the Government MCAI remained essentially unchanged. Of the component indices of the Conventional MCAI, the Jumbo MCAI decreased by 0.7 percent, and the Conforming MCAI fell by 1.2 percent. The competition for housing results in fewer options, higher prices, and faster sales. In a seller's housing market, there are more interested buyers than available homes and that makes it a difficult time to buy a house, especially for first-time buyers. According to the NAR, the national median price for existing homes sold in October was $384,800, up 8.4% from the same month in 2021. This is the longest streak of year-over-year growth ever recorded, spanning 127 months. However, it was the third month in a row that the median sales price retracted after reaching a record high of $413,800 in June, the usual seasonal trend of prices declining after peaking in the early summer.

Is it a Good Time to Buy a House for First-Time Buyers?

According to a recent Fannie Mae survey, many consumers are hesitant to buy a home in 2022. About 67% of survey respondents expect mortgage rates to increase, and there are rising concerns about job stability and escalating housing prices. Some homebuyers will find the current market conditions easier, while others will find them more difficult to buy a house. The current upward trend in home prices is likely to continue throughout the year, which could price out some prospective buyers. However, it is anticipated that prices will rise at a slower rate than they did in 2021. The current lack of entry-level supply and the rapid increase in mortgage rates appear to be negatively impacting potential first-time homebuyers in particular, as evidenced by the larger proportion of younger respondents (aged 18 to 34 years old) who believe it is a bad time to buy a house. The advantage of the historically low mortgage rate environment of the previous year appears to have diminished for first-time homebuyers, and affordability is projected to become an even greater constraint for them in the future.

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In October 2022, first-time buyers were responsible for 28% of sales, down from 29% in both September 2022 and October 2021. According to NAR, the annual share of first-time buyers was 34% in 2021. Individual investors or second-home buyers, who make up many cash sales, purchased 16% of homes in October, up from 15% in September, but down from 17% in October 2021.

Here’s why first-time buyers should jump back into the market:

Mortgage rates made the largest one-month drop since 14 years ago

There are fewer homes available to purchase in most U.S. markets

Home sellers are making fewer price cuts on their homes

In 2022, rising mortgage rates are piling onto record-breaking home prices, locking even more potential buyers out of the red-hot housing market. Historically, rising interest rates cause more prospective buyers to delay purchases, and the recent increase in financing terms has already resulted in a decline in mortgage applications. The prices are not going down in 2022 as well as in 2023. The various forecasts from experts show that 2023 will remain a moderate sellers' housing market, and home values are estimated to either remain flat or increase by single-digit percentage points. While affordability concerns continue to grow, low mortgage rates, increased savings, and a strengthening job market all contribute to making homeownership more accessible to a wide number of prospective buyers. Realtor.com’s November 2022 housing data shows that the housing market continues to moderate with growing inventory levels, fewer pending listings, a slower sales pace, and slowing price increases. The inventory of properties for sale has surpassed 2020 levels but is below pre-pandemic levels in all regions except the West, where it may approach 2019 levels as early as next month. Homebuyers continue to cite high home prices and high-interest rates as primary deterrents. The median national list price declined to $416,000 in November, down from an all-time high of $449,000 in June (-7.9%). This represents an annual growth rate of 11.0%, a deceleration from last month’s growth rate of 13.3%, and down from a peak growth rate of 18.2% in June. Home prices have typically declined by about 2% from summer’s peak by November, so this year’s price slow-down is larger than the usual seasonal easing. Over the past year, the national inventory of properties actively for sale on a typical November day climbed by 46.8%. This resulted in 240,000 more properties being actively listed for sale on an average November day than the previous year. The inventory growth rate increased from last month's rate of 33.5% when it had just surpassed 2020 levels, although it remains 38.1% below typical pre-pandemic levels for 2017 to 2019. The median list price grew by 11.0% in November and is decelerating from higher growth rates in recent months. Time on market was 56 days, 8 days more than last year but 18 days less than typical pre-pandemic levels.

The national inventory of active listings increased by 46.8% over last year.

The total inventory of unsold homes, including pending listings, increased by just 3.0% year-over-year due to a decline in pending inventory (-35.6%). Sellers are less active than last year, as newly listed homes declined by 17.2% on a year-over-year basis. Active listing prices in the nation’s largest metros grew by an average of 8.8% compared to last year. Midwestern metros led the charge in active listing price growth, growing by 13.1% on average over the past year. Western metros saw the greatest increase in the share of price reductions (+15.7 percentage points), followed by southern metros (+13.8 percentage points). Housing Markets that saw the largest year-over-year increase in listing prices in November 2022:

Milwaukee, where the median listing price grew by +38.1%

Memphis, where the median listing price grew by +26.9%

Miami, where the median listing price grew by +24.8%

Housing Markets that saw the greatest increase in their share of price reductions compared to last year:

Phoenix (+28.4 percentage points)

Austin (+23.8 percentage points)

Denver (+21.0 percentage points)

Conclusion: The Best Time To Buy A Home Depends On You

Higher interest rates pose a challenge to existing homeowners looking to buy a new home at the same time as selling their current home. Existing homeowners may benefit from lower interest rates than those offered right now because they already have mortgages. Their monthly expenses could rise dramatically as a result of the purchase of a new property. In other words, if you don't have a specific date in mind for when you want to buy a new property, you may be better off waiting till it does. Every potential buyer's best time to buy a property is different, and the greatest time to buy a house is not the same for everyone. It’s essential to consider your financial situation and understand how buying will impact your bottom line each month. For many first-time homebuyers, it doesn't matter if loan rates are too high, if there aren't enough homes available, or if you don't have enough money in the bank. When the time is right to purchase a home, the time is right. First-time buyers can accomplish the American Dream of homeownership without a 20% down payment. The government offers several mortgage schemes with minimal or no down payment, as well as down payment assistance programs.

Sources:

noradarealestate.com - Is it a Good Time to Buy a House or Should I Wait Until 2023-2024

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