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Avoid The Rental Trap - 2023
If you’re a renter, you likely face an important decision every year: renew your current lease, start a new one, or buy a home. This year is no different. But before you dive too deeply into your options, it helps to understand the true costs of renting moving forward.In the past year, both current renters and new renters have seen their rent go up based on information from realtor.com:“Three out of four renters (74.2%) who have moved in the past 12 months reported seeing their rent increase. The strain from recent rent hikes isn’t exclusive to renters who have recently moved. Nearly two-thirds of renters (63.2%) who have lived in their current rental between 12 and 24 months, and likely renewed their lease, have also reported increases in their rent.”And if you look back at historical data, that shouldn’t come as surprise. That’s because, according to the Census, rents have been rising fairly consistently since 1988 (see graph below):So, if you’re considering renting as an option in 2023, it’s worth weighing whether this trend is likely to continue. The 2023 Housing Forecast from realtor.com expects rents will keep climbing (see graph below):That forecast projects rents will increase by 6.3% in the year ahead (shown in green). When compared to the blue bars in the graph, it’s clear that the 2023 projection doesn’t call for an increase as drastic as the ones renters have seen over the past two years, but it’s still above the historical average for rent hikes between 2013-2019.That means, if you’re planning to rent again this year and you’ve not yet renewed your lease, you may pay more when you do.Homeownership Provides an Alternative to Rising RentsThese rising costs may make you reconsider what other alternatives you have. If you're looking for more stability, it could be time to prioritize homeownership. One of the many benefits of owning your own home is it provides a stable monthly cost that you can lock in for the duration of your loan. As Freddie Mac says:“Monthly rent payments may increase over time, but a fixed-rate mortgage will ensure that you're paying the same amount each month. With a fixed-rate mortgage, your interest rate is locked in for the life of loan. Steady payments allow you to budget wisely and make plans for the future.”If you’re planning to make a move this year, locking in your monthly housing costs for the duration of your loan can be a major benefit. You’ll avoid wondering if you’ll need to adjust your budget to account for annual increases like you would if you left your housing payment up to your landlord and their renewal cycle.Homeowners also enjoy the added benefit of home equity, which has grown substantially. In fact, the latest Homeowner Equity Insight report from CoreLogic shows the average homeowner gained $34,300 in equity over the last 12 months. As a renter, your rent payment only covers the cost of your dwelling. When you pay your mortgage on a house, you grow your wealth through the forced savings that is your home equity.Bottom LineIf you’re thinking of renting this year, it’s important to keep in mind the true costs you’ll face. Let’s chat to see how you can begin your journey to homeownership today.
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Housing Inventory Update
What Buyers Need To Know About the Inventory of Homes Available for Sale If you’re thinking about buying a home, you’re likely trying to juggle your needs, current mortgage rates, home prices, your schedule, and more to try to decide if you want to jump into the market. If this sounds like you, here’s one key factor that could help you with your decision: there are more homes for sale today than there were at this time last year. According to Calculated Risk, for the week ending in November 18th, there were 47.7% more homes available for sale than there were at the same time in 2021. And having more options for your home search may be exactly what you need to feel confident about making a move. Here’s a look at where the increased housing supply is coming from so you can get a better sense of what’s happening in the market today and what it means for you. What Caused the Growth in Housing Inventory This Year? The increase we’ve seen in housing supply this year isn’t from the source you think it is. Rather than an influx of recent homeowners listing their houses for sale (known as new listings), the primary reason the supply has grown is because homes are staying on the market a bit longer (known as active listings). That’s happening because higher mortgage rates and home prices have helped moderate the peak frenzy of buyer demand, which has slowed down the pace of sales. And, as the pace of sales has eased, inventory has grown as a result. The graph below uses data from realtor.com to show that it’s active listings, not new listings, that have driven the growth we’ve seen over the past few months: And while overall inventory gains may slow down this winter due to typical housing market seasonality, you still have a chance to capitalize on the current supply. What This Means for Your Home Search Regardless of the source, the increase in available housing supply is good for buyers. More homes available for sale means you have more options to choose from as you search for your next home, and you may even have more time to consider them. So, if you tried to buy a home last year and lost out in a bidding war or just couldn’t find something you liked, this may be the news you’ve been waiting for. If you start your search today, those additional options should make it less difficult to find a home you love, especially as some other buyers pause their search this holiday season. Just remember, housing supply is still low overall, so it won’t suddenly be easy – it’ll just be less challenging than it was at this time last year. As a recent article from realtor.com says: “Despite this improvement in the number of homes actively for sale, active listings still lag their pre-pandemic levels.” The increase in housing supply helps put you in a great position to kick off the new year in your dream home. And who better to help you find it than a trusted, local real estate professional? Bottom Line If you’re ready to jump into the housing market and see what’s available in our local area, let’s connect.
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Down Payment Rundown
Saving for a Down Payment? Here’s What You Should Know. As you set out to buy a home, saving for a down payment is likely top of mind. But you may still have questions about the process, including how much to save and where to start. If that sounds like you, your down payment could be more in reach than you originally thought. Here’s why. The 20% Down Payment Myth If you believe you have to put 20% down on a home, you may have based your goal on a common misconception. Freddie Mac explains: “. . . nearly a third of prospective homebuyers think they need a down payment of 20% or more to buy a home. This myth remains one of the largest perceived barriers to achieving homeownership.” Unless it’s specified by your loan type or lender, it’s typically not required to put 20% down. According to the latest Profile of Home Buyers and Sellers from the National Association of Realtors (NAR), the median down payment hasn’t been over 20% since 2005. There are even loan types, like FHA loans, with down payments as low as 3.5%, as well as options like VA loans and USDA loans with no down payment requirements for qualified applicants. This is good news for you because it means you could be closer to your homebuying dream than you realize. For more information, turn to a trusted lender. Down Payment Assistance Programs Can Be a Game Changer A professional will be able to show you other options that could help you get closer to your down payment goal. According to latest Homeownership Program Index from downpaymentresource.com, there are over 2,000 homebuyer assistance programs in the U.S., and the majority are intended to help with down payments. A recent article explains why programs like these are helpful: “These resources can immediately build your home buying power and help you take action sooner than you thought possible.” And if you’re wondering if you have to be a first-time buyer to qualify for these programs, that’s not always the case. According to an article from downpaymentresource.com: “It is a common misconception that homebuyer assistance is only available to first-time homebuyers, however, 38% of homebuyer assistance programs in Q1 2022 did not have a first-time homebuyer requirement.” There are also location and profession-based programs you could qualify for as well. Bottom Line Saving for your down payment is an important first step on your homebuying journey. Let’s connect today and make sure you have a trusted lender to help explore your options.
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