2019 Promises to Be Better for Buyers –According to realtor.com®, after inventory and affordability challenges in 2018, prospective home buyers may have better chances of scoring a property this year. Affordability will remain an issue in some high-priced markets, says realtor.com® Chief Economist Danielle Hale, but overall, the national market is looking brighter for buyers who have stayed on the sidelines. Here’s why.
- More homes are for sale. For the last few years, a limited number of listings has given buyers fewer choices. But housing experts predict more robust inventory this year. “For buyers, there is going to be more inventory, so that’s a bright spot,” Hale says. “The downside of that bright spot is it might not be in their price range.” The supply of homes for sale under $300,000 may not grow significantly, but they’re also not decreasing, she adds.
- Home price growth is slowing. Home prices will still rise but at a much slower pace than the last few years. Hale predicts a 2.2 percent increase in home prices this year, down from last year’s nearly 5 percent growth. “We do still anticipate rising home prices, particularly for below-median-priced homes, so buyers in that price range may have some incentive to buy sooner rather than later,” Hale says. On the flip side, “as rising costs raise the bar to homeownership, some would-be buyers will be knocked out of the market. The remaining buyers may have less competition to contend with than they saw in 2018.”
- Mortgage rates are lower. The 30-year fixed-rate mortgage has backed away from the 5 percent mark, decreasing early this year. “That’s definitely a huge opportunity for buyers because it drastically improves affordability,” Hale says. “And I think that if these low rates persist for a little while, then we’ll actually see stronger sales than we originally forecast.”
Mortgage Rates Fall to 10-Month Low – Based on Freddie Mac reports, borrowing costs were cheaper recently, as mortgage rates continued inching down. “The U.S. economy remains on solid ground, inflation is contained, and the threat of higher short-term rates is fading from view, which has allowed mortgage rates to drift down to their lowest level in 10 months,” says Sam Khater, Freddie Mac’s chief economist. “This is great news for consumers who will be looking for homes during the upcoming spring homebuying season. Mortgage rates are essentially similar to a year ago, but today’s buyers have a larger selection of homes and more consumer bargaining power than they did the last few years.”
Where Women Are Buying the Most Homes – According to a new report from personal finance website SmartAsset, women have grown more powerful as a homebuying force over the last few decades, and they tend to take on more financial risk than their male counterparts. In 348 of 402 metros analyzed by SmartAsset, women had a larger loan-to-income ratio than men. SmartAsset ranked the places where women are buying the most homes by looking at the percentage of mortgages approved for women and comparing that to the percentage of mortgages approved for men.
Are Buyers Using Adjustable Mortgages Responsibly? Based on the Mortgage Bankers Association reports, borrowers applying for adjustable-rate mortgages are asking for much larger loan amounts, raising concerns among housing analysts that ARMs are being used haphazardly, just as they were during the prerecession housing bubble more than a decade ago. The average size of an adjustable-rate mortgage increased to $688,400 recently, more than double the average fixed-rate mortgage, which is $280,900. Experts say borrowers are attracted to ARMs for their lower introductory rates, but once they reset to market value after five or seven years, homeowners may no longer be able to afford them. Economists are quick to point out that ARMs today are very different from the 2008 bubble-and-bust era. MBA Chief Economist Mike Fratantoni told MarketWatch that ARMs typically carry larger balances than fixed-rate mortgages because they help those struggling to afford an expensive home. “I think there is still a desire to use the product which is going to get you into the home, and then there may be an opportunity to refinance into a fixed-rate mortgage later,” Fratantoni says. Higher-income borrowers also may be more tolerant of the financial risks of ARMs, he adds. But the abuse of ARMs isn’t likely to occur like it did a decade ago, some economists say. Lenders are much more strict about issuing ARMs today than they were years ago, Fratantoni says. Lenders now verify that borrowers can afford any monthly payment during the life of the loan, even if the rate resets.