Will the Housing Market Maintain Its Momentum?

Last week’s Existing Home Sales Report from the National Association of Realtors (NAR) shows sales have dropped 3.7% compared to the month before. This is the second consecutive month that sales have slumped. Some see this as evidence that the red- hot real estate market may be cooling. However, there could also be a simple explanation as to why existing homes sales have slowed- there are not enough homes to buy. There are currently 410,000 fewer single family homes availed than there were at this time last year.

Lawrence Yun, Chief Economist at NAR, explains in the report:

“The sales for March would have been measurably higher, had there been more inventory, Days-on-market are swift, multiple offers are prevalent, and buyer confidence is rising.”

Yun’s insight was supported the next day when the Census Bureau released its Monthly New residential Sales Report. It shows that newly constructed home sales are up by 20.7% over the previous month.

Buyer demand remains strong. With more of the adult population becoming vaccinated and job creation data showing encouraging signs, existing- home inventory is expected to grown in the coming months.

What will this bean for homes sales going forward?

Fannie Mae, Freddie Mac, and the Mortgage Bankers Association (MBA) have all forecasted that total home sales (exist homes and new constriction ) will continue their momentum both this year and next. Here’s a graph showing those projections:

Bottom Line

Living through a pandemic has caused many to re-evaluate the importance of home and the value of homeownership. The residential real estate market will benefit from both as we move forward.

How to Make the Dream of Ownership a Reality This Year

1. How Can I Better Understand the Process, and How Much Can I Afford?

The process of buying a home is not one to enter into lightly. You need to decide on key things like how long you plan on living in an area, school districts you prefer, what kind of commute works for you, and how much you can afford to spend.

Keep in mind, before you start the process to purchase a home, you’ll also need to apply for a mortgage. Lenders will evaluate several factors connected to your financial track record, one of which is your credit history. They’ll want to see how well you’ve been able to minimize past debts, so make sure you’ve been paying your student loans, credit cards, and car loans on time. If your financial situation has changed recently, be sure to discuss that with your lender as well. Most agents have loan officers they trust and will provide referrals for you.

2. How Much Do I Need for a Down Payment?

In addition to knowing how much you can afford on a monthly mortgage payment, understanding how much you’ll need for a down payment is another critical step. Thankfully, there are many different options and resources in the market to potentially reduce the amount you may think you need to put down.

If you’re concerned about saving for a down payment, start small and be consistent. A little bit each month goes a long way. Jumpstart your savings by automatically adding a portion of your monthly paycheck into a separate savings account or house fund. AmericaSaves.org says:

3. Saving Takes Time: Practice Living on a Budget

As tempting as it is to pass the extra time you may be spending at home these days with a little retail therapy, putting that extra money toward your down payment will help accelerate your path to homeownership. It’s the little things that count, so start trying to live on a slightly tighter budget if you aren’t doing so already. A budget will allow you to save more for your down payment and help you pay down other debts to improve your credit score.

survey of millennial spending shows, “68% reported that shelter in place orders helped them save for their down payment.” Danielle Hale, Chief Economist at realtor.com, also notes:

“If there is any silver lining to the current economic landscape, it’s that mortgage rates are hanging around record lows…Additionally, shelter-in-place orders helped many who were fortunate enough to keep their jobs save for a down payment — one of the largest hurdles of buying a home. The combination of low rates and the opportunity to save is enabling many millennials to move up their home buying timeline.”

While you don’t need to cut all of the extras out of your current lifestyle, making smarter choices and limiting your spending in areas where you can slim down will make a big difference.

Bottom Line

If homeownership is on your dream list this year, take a good look at what you can prioritize to help you get there. To determine the steps you should take to start the process, let’s connect today.