Will 2022 Home Prices Still Surge?

 CoreLogic Principal Economist Molly Boesel reviels that the home price appreciation will slow down after last year’s surge. 2021 brought an 18.5% year over year increase in national home prices. CoreLogic Home Price Index’s data shows this is the highest 12-month gain since the index was founded in 1976.

 

“Consumer desire for homeownership against persistently low supply of for-sale homes created one of the
hottest housing markets in decades in 2021 and spurred record-breaking year-over-year home price growth,” Boesel said.

This year, Boesel predicts that the annual growth rate in home pricing will slow down each month and will average 9.6% for the full year.

Rent has also increased in single-family homes. Rent was up 11.5% year-over-year in November 2021.

“The November 2021 increase was more than three times the November 2020 increase, and while the index growth slowed in the summer of 2020, rent growth returned to its pre-pandemic rate by October 2020,” Boesel noted.

Now is a great time to purchase a home. Contact a local Realtor who knows the market and the area.

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The Impact Mortgage Rates Will Have on Spring Home Buying

 Looks like mortgage rates are going to rise and home inventory should start to pick up. Home prices are still increasing at a fast past and probably will continue through this year. According to First American’s Real House Price Index (RHPI),  affordability declined 21.0 percent compared with a year ago, as the growth in nominal house prices combined with the 30-basis point increase in the 30-year, fixed mortgage rate vastly outpaced the 4.4 percent increase in income. Affordability is likely to decline further in 2022, because both mortgage rates and nominal house prices are expected to rise.  Here is what this will mean for you in the Spring.

Fed Expected to Raise Rates Soon

The Federal Reserve has announced rate increases will come due to fear of inflation. The long-term

bond yields are also increasing and the mortgage rates usually follow the same pattern as long-term bond yields. The Federal Reserve is tightening monetary policy, higher inflation expectations, and an improving economy. The majority of economists believe the 30-year fixed mortgage rate will increase to 3.7% by the end of this year.

Rising Mortgage Rates Likely to Reduce Affordability

The Real House Price Index which measures housing affordability based on changes in income, interest rates, and nominal house prices, can help industry leaders determine how shifts in interest rates and income can affect homebuyers’ power and affordability. Let’s face it, an increase in mortgage rates will impact affordability. When the rates increase, it usually means that the economy will improve and there will be stronger wage growth. A higher-income can even the playing field when it comes to an increase in home prices and interest rates.

FOMO (Fear of Missing Out) or FOBO (Fear of Better Options)?

Homebuyers are continually watching the interest rates, and many are buying homes now in order to avoid further inclines in the rates. It is reported that the rates will increase steadily through the remaining months of 2022. Many potential home buyers have FOMO, the fear of missing out, on the historically low-interest rates. Buyers are jumping into the market and pushing the springtime surge. On the flip side, the springtime is the time a lot of sellers list their homes and this might put homebuyers into the FOBO, fear of better options, mode. There may be better home options out there even if the prices are higher.

If you are in the market for a home, contact a local Realtor who can help you with the home buying process. A Realtor can also find the best neighborhood and home for you.

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Is a Lot or Construction Loan Right for You?

 

There is not much home inventory out there right now and it might be a good time to think about building your home. If you are considering building a custom home, then you will need to obtain a different loan other than just a mortgage on a home. Here are the different types of loans that are available for those looking to build.

Sometimes you find the right lot or piece of land but are not planning on building for a while. If this is

the case, then a lot or land loan is right for you. A lot or land loan is a little bit harder and more complex than a standard home mortgage. There are shorter terms, a higher downpayment, higher interest rates, and more commitment and underwriting for you.

“Owners of raw land are much more likely to stop making payments and walk away from the property in the event of a financial event in their lives,” says Casey Fleming, a mortgage adviser with C2 Financial Corporation.“And land is much harder to sell [than a home].”Many lenders do not even offer lot loans, and community banks and local credit unions can be a better bet than large national banks. As with any loan, be sure to shop around so you can compare all of the offers available to you.”

If you are ready to purchase land and build right away or if you have land and want to build, the construction loan is best for you. If you own land, the equity on the land can be put up as collateral to help finance your construction loan.

When you are shopping for a construction loan, make sure to choose a very experienced construction loan broker. There are two types of construction loans a standard short-term and an all-in-one.

A short-term loan is used most when someone is financing to build a custom home. The short-term loan is used to build the home, and then a long-term loan (mortgage loan) is used to pay off the completed home. In order to be pre-approved, you will need to have a downpayment of at least 20% to 30%, a good credit score, a low debt-to-income ratio, and cash reserves.

There are plus and minuses to using this type of loan. The negatives are you have to have two closings and you might receive terms for your second mortgage that aren’t what you were planning on due to rising interest rates. On the other hand, you might get a better rate if the rates are lowered during the time period you are closing on your mortgage. A positive to this loan type is flexibility due to the ability to pick and choose instead of relying on a package loan deal.

The other option is an all-in-one loan. So instead of two separate loans, lenders offer packages with short-term construction loan terms and a mortgage loan set in advance.  The construction loan is converted to a long-term, permanent mortgage after the construction is completed, meaning there is just one loan and one closing. For preapproval on an all-in-one loan, you must obtain a qualified, licensed builder, detailed specifications about the custom home which includes projected costs, and a home value estimate from an appraiser based on the plans of the home you are going to build.

If you are planning to purchase land and build a home either now or in the future, contact a lender who specializes in these types of loans. They will not only be able to advise you on what type of loan is best, but also will get you the best rates possible with great terms.

“The construction-to-perm loan allows you to modify your construction loan to the permanent stage, which can be any term that you chose when the construction-to-perm lender offered it to you at the beginning of the construction stage. You normally do not have to requalify for the permanent loan,” says mortgage expert Joey Campbell.

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The Plus and Minuses of Buyer a Home During the Winter

 It is said that spring is the time to buy a home but is this always the case? During the winter its cold and everyone is focusing on the holidays so it might just be the right time to search for a home. During the winter there is less competition and motivated sellers. Here are several reasons why it just might work for you.

Less competition

Homebuyers tend to buy during the warmer months so the colder months have less homebuyers in the market. For family with kids, the summer is the best time to make a big family change like moving.

Remember, during the winter, without as much competition, you are more likely to win a bidding war in a competitive market.

Faster escrow closing

Since home sale surge during the spring/summer, loan officers are extremely busy. Since there are less homebuyers during the winter, the loan processors are not as busy. You can move through the loan process faster and more efficiently.

Motivated sellers

There usually is a reason a seller list during the winter. Generally they do so out of need, not desire. If you are looking during the winter you can take advantage of this.

Lower home prices

Usually sellers who sell during the winter need to sell. When sellers need to sell for a reason they usually price to sell. The winter is the time to find a home for a bit lower price.

Inclement weather showings

Looking at home in the wind, rain or snow will give you a good idea of how much the house can withstand. Ask to look at current utility bills to see how they house holds up in hard weather. If the home is drafty, this is the perfect time to figure that out.

Final note on buying in winter versus spring

Trends can vary region to region so it should be a person choice of when you want to hit the market. Contact a Realtor if you are in the market for a new home. No matter the season, a local sale agent can help you along the way.

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