If you’ve been sitting on the sidelines waiting to buy, now is the time to get on the field. Interest rates are down, sellers are selling and, while I hate to break it to you, the current prices are the new normal. Let’s dive into the 3 reasons why spring may be the perfect opportunity to buy a home.
Interest Rates are Going Down
In October 2023, mortgage rates hit a 23-year high of 7.79%. As of today, the average rate on a 30-year mortgage is 6.74%. Economists forecast rates closer to 6% in the coming months. This downward trend in interest rates will undoubtedly result in more buyers (and sellers – finally!) entering the real estate market this spring.
Sellers are Selling
Lower inventory was a major concern last year. Despite homeowners having the equity to sell and move on up, many were reluctant to do so because it meant they would be entering a market with low inventory and high interest rates, which has been the challenge for buyers.
Now we’re seeing a shift! In January, sales accelerated with a 3.1% uptick in existing-home sales. This gain is the start of more supply and more demand, according to Lawrence Yun (NAR Chief Economist).
While there are still a significant amount of homeowners with lower interest rates holding on to their homes, about 21% of homeowners are considering selling. Rising inventory means there are fewer buyers to compete with.
Current Prices are the New Normal
If you’ve been here for a while, you may remember this article where I said (and I quote!): “It would be nothing short of a miracle for home prices to go down to what they were 5 years ago. It’s just highly unlikely.” Experts are now echoing that sentiment with Florida Realtors Chief Economist, Dr. Brad O’Connor, stating that the real estate market is reigniting in 2024 as consumers realize that the prices we are currently seeing are the new normal.
Since prices soared in 2020, predictions warned of a housing market crash or a housing bubble that would soon pop. I’m sure you too heard people saying they were waiting for the crash to buy, which I also spoke about in the above linked article. Ian Shepherdson, a Wallstreet Columnist, predicted in late 2022 that home prices would fall in 2023 by as much as 20%. Didn’t happen. Goldman Sachs predicted a decline of up to 10%. Also didn’t happen. Jerome Powell, Federal Reserve Chair, proclaimed that the prices were increasing at levels that were unsustainable. This was also in 2022.
What actually happened in the years that followed? No crash and no pop. Despite high interest rates, home prices held steady. The current prices, which were mostly the result of a supply shortage, are here to stay. The good news is we can expect prices to remain steady with experts predicting increases to be in the low single digits this year. If you’re intrigued by the housing market crash that didn’t happen, check out The myth of the housing bubble.
A homeowner’s financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage.
EQUITY
Homeownership is a straight forward path to wealth building, with the key component being equity. Getting in the game means you start building equity now. Your home equity can be used in ways that will strengthen your financial profile, like starting a business, purchasing assets, and moving on up like the Jeffersons!
The townhome below was purchased 4 years ago. After realizing how much equity she had, my client decided to explore moving from south Florida to central Florida. Remember we talked about the housing market heating up this year? This home was under contract in 3 days. She closed in less than 30 days and walked away with $155,000 in profit. She could’ve rented this house for 4 years and had nothing to show for it. Just a returned security deposit.
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