Mortgage rates have held near historic lows even past the busiest homebuying season of the year and we’re coming up on the best month of the year to buy a home. Here’s what you should know about the current housing market as a first-time buyer, move-up buyer or home seller.
Low inventory is keeping the market competitive.
According to the National Association of Realtors, nearly half of homes on the market today sell in less than a month.
Leading into fall, August existing home sales dropped to the second lowest pace of the year. According to the National Association of Realtors chief economist, Lawrence Yun, the reason for the descent continues to be “lack of inventory choices and prices rising way too fast”.
Mortgage rates have remained near historic lows.
Summer homebuyers experienced near-historically low mortgage rates thanks to Brexit. Though the national average 30-year fixed mortgage rate increased to a post-Brexit high in mid-September, mortgage rates are still extremely favorable.
According to the most recent Fannie Mae National Housing Survey, 56 percent of consumers believe mortgage rates will stay the same or drop in the next twelve months. In August 2015, only 41 percent of respondents said low rates would hold, but since the beginning of 2016, 30-year mortgage rates have dropped 47 basis points, according to The Mortgage Reports.
The Fed delayed plans to raise the federal funds interest rate at their September meeting due to mixed economic reports, but a rate hike is still on the table before year’s end. Though the federal funds interest rate doesn’t have a direct impact on mortgage rates, they will likely see an eventual uptick if the Fed moves to raise rates in December.
New home sales have dropped but so have their prices.
After surging to a cycle high in July, new home sales fell back a monthly 7.6 percent in August. The report for August showed declining prices, which were down a monthly 3.1 percent to a median price of $284,000. Year-over-year prices are down 5.4 percent pointing to builder discounting.
New home inventory remains low at 4.6 months but is still up 8.3 percent year-over-year.
Home prices are still on the up & up.
According to the Federal Housing Finance Agency House Price Index, U.S. home prices increased 0.5 percent on a seasonally adjusted basis in July following an upward-revised June of 0.3 percent. Year-over-year prices were up 5.8 percent.
Some Home Price Index reports, like that of Black Knight Financial Services Inc., noted that prices were less than one percent away from a national 10-year peak.
First-time homebuyers and move-up buyers may feel the squeeze of tightening home affordability.
As limited inventory continues to play a substantial role in increasing home prices, first-time homebuyers and move-up buyers are likely to be the most affected. Trulia’s National Inventory Monitor for the third quarter of 2016 showed that starter homes and trade-up homes both declined 10.7 and 9.2 percent. Median listing prices of starter homes were up 7.4 percent and trade-up homes were up 6.4 percent in the third quarter.