Last Updated on May 31, 2022 by Luke Feldbrugge
Mortgage rates are climbing, and home prices are too, so is now a good time to buy a home? There is some indication the housing market might be starting to normalize. That may mean more home inventory is on its way.
Rising Mortgage Rates Have Big Impact on Buyers
In the middle of May, mortgage rates rose for the ninth time in ten weeks. 30-year fixed mortgage rates rose by three basis points to 5.3 percent, Freddie Mac reported. That means that the monthly mortgage payment on a typical home is about $520 more since the first week of January when rates were 3.2 percent. How does that make a good time to buy a home?
Buyers are reacting, judging by the latest mortgage application figures reported by the Mortgage Bankers Association. Applications are down 15 percent, compared with the same week one year ago. That was the first weekly drop in homebuyer demand since the third week in April.
Limited Affordable Housing
If you are a first-time homebuyer, rates aren’t the only factor keeping you from successfully buying a home. The US continues to grapple with a limited supply of affordable housing stock. According to Realtor.com, the national inventory of active listings declined by 12.2 percent over last year, while the total inventory of unsold homes, including pending listings, declined by 10.7 percent. The stock of active listings was down 60.1 percent compared to 2020, right at the onset of the COVID-19 pandemic. In other words, for every five homes available for sale in the earlier period, today, there are just two.
While all this looks like a housing downturn, and not a good time to buy a home, bear in mind this kind of cycle in the market can be played to your advantage. For one, buying a home is still a great deal! Plus there are positive signs on the horizon.
Are Home Inventory Levels on the Rise?
Here is some good news. Zillow has reported that inventory levels are already beginning to bounce back, with inventory rising in March, enough to start closing the gap with inventory levels a year ago. It now looks likely that inventory will notch year-over-year growth sometime later in 2022, which hasn’t occurred since September 2019.
The Biden Administration recently unveiled a new plan to increase the supply of housing enough to end the inventory shortage within five years.
Sidelined Homebuyers May Enter Market
Does more housing mean the market could be tipped over the edge? Not likely. The fact is that many would-be homebuyers sidelined by the current hot housing market would have an appetite for homes at lower prices, even at higher borrowing rates. After all, lower prices would cancel out the higher costs of borrowing.
Zillow predicts that these first-time buyers will continue to feel the pressure from rising rents, which jumped 17 percent in the past 12 months. And a generally high-inflation environment will keep homeownership looking attractive as a hedge against inflation.
When aligned with other policies to reduce housing costs and ensure affordability, such as rental assistance and downpayment assistance, closing the gap will mean more affordable rents and more attainable homeownership for Americans.
Homes for Heroes Saves Heroes Money When They Buy, Sell or Refinance
If you’re a firefighter, EMS, law enforcement, veteran or reserve military member, healthcare professional, or teacher and you’re ready to buy and/or sell a home, we would be honored to work with you to get it done and save you money in the process. Let our real estate and mortgage specialists in your area work with you to find the home you want. If you close on a home with your local Homes for Heroes specialists, you can save an average of $2,400 after closing!!!
Simply sign up today to learn more about how our specialists can assist and save you some money.
