Aug. 28, 2018.
Summer temps are cooling, and an even hotter housing market is starting its seasonal slowdown. Last month, home sales began a surprising decline. Sales for July 2018 hit their lowest point in two years, according to National Association of Realtors® (NAR) numbers. MarketWatch analysts blame sluggish sales on higher rates and rising prices, leading loan officers to share creative ideas that make it possible — and affordable — to buy.
What to do when you’re priced out: 3 home-buying hurdles with 3 solutions
A pricey housing market can look intimidating. But loan officers find that there’s still plenty of opportunity to buy:
Problem #1: First-time buyers face inventory shortages at higher price points.
“Too many would-be buyers are either being priced out, or are deciding to postpone their search until more homes in their price range come onto the market,” NAR chief economist Lawrence Yun explains of the roadblock many first-time buyers currently face. Median home prices in July 2018 reached $269,600, increasing 4.5 percent from one year before. July 2018 was also the 77th month in a row of year-over-year home price gains.
While housing inventory decreased only 0.5 percent in July 2018, consistent with numbers from the previous year, moderately-priced homes were snatched up quickly, Yun says. “Listings continue to go under contract in under a month… Existing supply is still not at a healthy level, and new home construction is not keeping up to meet demand.”
Solution #1: Consider a new build and ask for a guaranteed rate lockdown.
A loan officer who provides a long-term extended rate lock can be a big help to keep your interest rate — and your monthly payment — stable as mortgage rates rise. Mortgage rates have increased in the past year but remained steady in recent months with a few dips that have given first-time buyers opportunity to act.
Mortgage rate locks boost housing inventory indirectly as they help builders sell homes in a rising rate environment, Michelle Gonzales of Cornerstone Home Lending, Inc., says. “If a buyer is building a home rather than purchasing an existing home, they are likely concerned about rising rates. We offer buyers longer term rates locks so they can lock the rate in at contract and not risk rates going up while a home is under construction.”
If you’re ready to take the first step toward buying a house, start by getting prequalified online.
Problem #2: Homeowners ready to trade up don’t want to sacrifice a low rate.
You might be pleasantly surprised to find you can often trade up and move to a bigger home in a better location for the same or lower monthly payment. It all depends on the mortgage program you select. Working with a loan officer who provides more mortgage programs than many other lenders can address many affordability concerns right out of the gate.
Having more home loans to choose from can also jump what MarketWatch analysts consider to be a significant hurdle for homeowners in today’s tight market: rising interest rates. And, it helps to remember that a 30-year mortgage isn’t an absolute, Jacob Washburn of Cornerstone Home Lending, Inc., says. “We find that most people keep their initial mortgage for around four years. Things in life change. Just because a specific mortgage product was used to purchase a home doesn’t mean it will be the right mortgage for the next 30 years.”
Solution #2: Take advantage of a sellers’ market without taking on a higher payment.
Don’t throw in the towel yet. It’s still a sellers’ market, likely until 2020. Seventy-six percent of 100 real estate economists surveyed by Zillow and Pulsenomics LLC in 2018 predicted housing conditions won’t shift to a buyers’ market for at least two years. Homeowners can still leverage their home sales and increasing equity in this favorable market to trade up and get a better deal on a new mortgage.
A profitable home sale may allow you to make a larger down payment. You could also afford more when you buy.
A knowledgeable loan officer can help you find the right mortgage program that may come with the same or lower monthly payment. And once you buy, your loan officer doesn’t stop looking out. “All our clients automatically enroll in our Mortgages Under Management program once they close their loan,” Washburn says. “Each year, we conduct annual reviews with our clients, and we have several touch points throughout the year. The goal of this program is to reevaluate the mortgage debt structure to ensure that our clients always have the most cost-effective mortgage strategy as their lives change.”
The key to snagging — and keeping — an affordable mortgage during a move is flexibility, Washburn explains. “If people just chose a mortgage and stuck with that same mortgage for 30 years, they oftentimes could end up paying a much higher overall cost during that period.” Much like a financial advisor will help clients reallocate their investments, Washburn says he assists his clients with reallocating their mortgage debt over the years.
Problem #3: High home prices are pushing all buyers out.
Rising home prices and interest rates are giving renters, first-time buyers, and homeowners pause. But lenders and realtors say buying now can still pay off, particularly with a shift in season.
The summertime slowdown, a.k.a. the end of August and September, can turn up new, affordable listings with more inventory options in many parts of the U.S. Summer may be the “hottest” time to buy as families grab houses before the school year starts, Kaitlynn Johnson, a Cornerstone Realtor Partner at Phillips Realty, says. But later in the summer, sellers are motivated, and there’s less competition. “You may even get to take advantage of price changes at the end of summer,” says Johnson.
Not only can you negotiate on pre-owned homes, Jordan Phillips, a Cornerstone Realtor Partner on the Dana Phillips Premier Team, adds, but new builders want to move their inventory before the end of the year. “Consumer Reports also states that September is the ideal time for buying appliances and yard tools, so you can coordinate your purchase accordingly.”
Solution #3: Get prequalified for a mortgage and get daily listings from your realtor.
Even during a seasonal slowdown, your relationship with your homebuying team — your loan officer and your realtor — can make all the difference. Get prequalified before you start the house-hunt to avoid time waste. Getting prequalified for a mortgage will tell you exactly how much house you can afford to buy. It may even bump you up into a higher price range at the end of season. Your loan officer may also suggest using a “like cash” program like Early Bird Approval to knock out all the prequalification details in advance. This will allow you to put in a weighty and fast-moving offer that comes as close to cash as possible.
To find the right house at the right price, Dana Phillips of the Dana Phillips Premier Team at Phillips Realty and Cornerstone Realtor Partner, also suggests to:
- View houses as soon as they come on the market. “Your agent should be sending you listing daily,” Phillips says. “Ask them to send you results in ‘real time’ to give you an optimal advantage.”
- Be proactive. You are buying one of the largest assets you may own in your lifetime, Phillips explains. “Drive the neighborhood — evening is a great time — and research school information for yourself.”
- Don’t play games. Phillips says her home market of San Antonio is hot. Even in late summer, the home you just fell in love with could be another’s top pick. “If you love it, don’t low ball your offer,” she says. “Put in a sensible offer based on a market analysis and suggestion provided by your agent.”
Mortgage on your terms — and in your budget
Higher home prices. Rising rates. Lower housing inventory. It’s all easy to navigate when you let your loan officer take over. Finding a loan officer who cares about getting you home as much as you do can make buying in today’s market feel stress-free. Click here to get connected to a local Cornerstone loan officer who benefits from more than 30 years of industry experience and get prequalified in minutes.*
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For educational purposes only. Please contact your qualified professional for specific guidance.
Sources deemed reliable but not guaranteed.