New year, new house? 2019 is off to a great start, a year where more resolutions of homeownership have been made. Families are ready to own, renters want to ditch their landlords, and homeowners plan to trade up from their starter home to their forever place. Wherever you fall on the homebuying spectrum, one thing’s for sure. There are two housing market factors you need to watch in 2019.
2 real estate variables you should track in 2019
Getting a grasp on two important housing market factors could make your homebuying experience easier:
1. Interest rates.
Mortgage rates were rising for most of 2018. But by the end of the year, homebuyers were happy to see some relief. Freddie Mac’s latest Primary Mortgage Market Survey showed that the 30-year fixed mortgage rate rose to 4.94 percent in November 2018, before dropping to 4.62 percent last week. Even with this recent dip, mortgage rates are still expected to rise to 5 percent in 2019.
The interest rate you get can affect how much you pay for your monthly mortgage. Not only that, your interest rate impacts your buying power too.
Buying power is basically how much house you can afford to purchase within your price range. When mortgage rates rise, the amount, or price, of a home you can afford will decrease if you stay within the same budget for your monthly mortgage.
Here’s a quick example: If you prequalified to buy a $400,000 house and plan to keep your total monthly mortgage (principal and interest payments) between $2,020 and $2,050, even slight upticks in mortgage rates could make quite a difference. Buying a $400,000 house with a 4.50 percent interest rate might cost you $2,026 a month. With just a 1-percent rate increase to 5.50 percent, you’d have to drop your home’s price to $360,000 to stay within your payment range of $2,044 a month.*
Every quarter-point interest rate increase drops the amount of house you can afford by 2.5 percent — or, based on this example, $10,000.
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For the real estate market to be labeled as “normal,” there needs to be at least a 6-month supply of homes for sale on the market. This “normal” level of inventory gives enough room for housing prices to rise, not by demand, but just because of inflation. Right now, listing inventory sits below the normal 6-month mark at only a 3.9-month supply, according to National Association of Realtors (NAR) Existing-Home Sales numbers. Low inventory has put pressure on home prices — explaining why housing prices have risen year-over-year for the past 81 consecutive months.
Housing inventory, or the number of homes available for sale, has been steadily dropping year-over-year for the last 36 months straight (starting in July 2015 through May 2018). But in the past six months, there’s been a welcome shift.
Here’s another helpful example: In June 2018, housing inventory finally moved out of the red zone, with a positive increase of 0.5 percent. Compare this to the same time last year, where inventory sat at a -6.1 percent in May 2017. This number was an improvement on the -11.1 percent inventory seen in December 2017.
Housing inventory is a good trend to track moving into the new year. Seeing an increase in listed homes could tip the balance away from a seller’s market and bring it back to normal.
Look for a lender that makes it look easy
Loan officers agree that 2019 is shaping up to be a great year to buy. Now you know what you’re looking for. To get more leverage, look for a local lender with experience. A skilled, local lender can take the stress out of buying by helping you find the right rate, navigate inventory fluctuations, and pick an affordable loan program to save you money.
*”Excited About Buying A Home This Year? Here’s What To Watch.” Keeping Current Matters, 2019. Rates listed are for illustrative purposes only.
For educational purposes only. Please contact your qualified professional for specific guidance.
Sources are deemed reliable but not guaranteed.