Reach Home Loans hopes that you and yours have a Happy Thanksgiving!
Gathering with friends and family is always appreciated. We won’t pretend we aren’t also looking forward to the huge discounts that will be available throughout the weekend as part of the Black Friday and Cyber Monday retail “holidays,” however.
The mortgage industry isn’t one where you’ve heard much about “low prices” recently. As we’ve indicated, rates have recently broken 5% and homebuyers will probably need to get used to it. Still, that doesn’t mean you’ve missed out if you didn’t buy a home during 2018! In fact, there are many things to be thankful for when looking forward to 2019!
Here are 4 factors a buyer can look forward to in the near future, even if they didn’t get to take advantage of the low rates over the past few years!
1. Inventory Will Be Higher
Rates have been low for the past few years, but that doesn’t mean it’s been “easy” to buy a home. As many recent homebuyers will tell you, they were far from the only ones looking for their dream home! The excess of interested buyers meant that sellers didn’t need to settle for low bids; the “Seller’s Market” meant many people were paying above asking price to beat the competition.
As rates rise during 2019, fewer people will be looking to buy. That means those who have held out will have more homes to consider, and more time to consider them. Some people might be willing to sacrifice lower rates for that benefit, but remember…
2. Your Total Cost Might Not Actually Rise!
Wait, what? How could the total price for buying a home remain the same, even with mortgage rates rising?
Remember the “Seller’s Market”? This allowed sellers to market their homes for more than they were worth. We may soon see a Buyer’s Market, where sellers are competing to attract smaller numbers of buyers. If a home sits on the market for a lengthy period of time, sellers may need to lower their price. So, for example, if you bought a $300,000 home in April 2018 at 4.5% over 30 years, you will probably pay a similar monthly amount at 5% if the seller dropped the price to $285,000 during April 2019.
3. New Homes Will Still be Available
One of the benefits to a Seller’s Market is that there are plenty of brand new homes available. Sure, there’s plenty of competition for them, but many are willing to pay a premium in order to be the first one to live in a home. Some are reporting that the number of new homes will dry up because of increased rates. Although this logic makes sense, it isn’t true.
One of the most popular headlines in late 2018 is that “homebuilder confidence plummets to the lowest level in more than two years.” This is true…but that confidence level is still 60 (anything over 50 is considered “confident”). The rate of new developments will slow down, but there will still be new homes (and again, less competition for them).
4. Rates Aren’t As High as You Think
Those who have entered the housing market for the first time in the past few years have been—for lack of a better term—spoiled. Following the 2007 crisis, rates came down to record lows to help spur homeownership during the nation’s economic struggles. Many people, and especially Millennials, accepted these new rates as the new “normal.” They weren’t.
In fact, if 5% seems crazy high to you, you may be surprised to learn how low it is, historically speaking. The average rate for 2006 was more than 6%. The average rate for 2000 was more than 8%. The average rate for 1982? Get ready for it…more than 16%. So generally speaking, things are looking good for buyers in 2019.
Now that’s something to be thankful for!