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Author: Seth Pfaehler

Are Higher Mortgage Rates Here To Stay?

Mortgage rates have been back on the rise recently and that’s getting a lot of attention from the press. If you’ve been following the headlines, you may have even seen rates recently reached their highest level in over two decades (see graph below):  

That can feel like a little bit of a gut punch if you’re thinking about making a move. If you’re wondering whether or not you should delay your plans, here’s what you really need to know.   

 How Higher Mortgage Rates Impact You  

 There’s no denying mortgage rates are higher right now than they were in recent years. And, when rates are up, that affects overall home affordability. It works like this. The higher the rate, the more expensive it is to borrow money when you buy a home. That’s because, as rates trend up, your monthly mortgage payment for your future home loan also increases.  

 Urban Institute explains how this is impacting buyers and sellers right now: 

 “When mortgage rates go up, monthly housing payments on new purchases also increase. For potential buyers, increased monthly payments can reduce the share of available affordable homes . . . Additionally, higher interest rates mean fewer homes on the market, as existing homeowners have an incentive to hold on to their home to keep their low interest rate.” 

 Basically, some people are deciding to put their plans on hold because of where mortgage rates are right now. But what you want to know is: is that a good strategy? 

 Where Will Mortgage Rates Go from Here? 

 If you’re eager for mortgage rates to drop, you’re not alone. A lot of people are waiting for that to happen. But here’s the thing. No one knows when it will. Even the experts can’t say with certainty what’s going to happen next.  

 Forecasts project rates will fall in the months ahead, but what the latest data says is that rates have been climbing lately. This disconnect shows just how tricky mortgage rates are to project.  

 The best advice for your move is this: don’t try to control what you can’t control. This includes trying to time the market or guess what the future holds for mortgage rates. As CBS News states: 

 “If you’re in the market for a new home, experts typically recommend focusing your search on the right home purchase — not the interest rate environment.” 

 Instead, work on building a team of skilled professionals, including a trusted lender and real estate agent, who can explain what’s happening in the market and what it means for you. If you need to move because you’re changing jobs, want to be closer to family, or are in the middle of another big life change, the right team can help you achieve your goal, even now. 

Bottom Line

The best advice for your move is: don’t try to control what you can’t control – especially mortgage rates. Even the experts can’t say for certain where they’ll go from here. Instead, focus on building a team of trusted professionals who can keep you informed. When you’re ready to get the process started, connect with a local real estate agent.

The Difference Between Renting and Buying a Home [INFOGRAPHIC]

Some Highlights

  • When deciding between buying a home or renting, think about these three important factors.
  • Buying a home means avoiding rising rents, owning a tangible and valuable asset, and growing your wealth over time.
  • If you’re ready to enjoy the advantages of owning a home, connect with a local real estate expert to discuss your options.

Growing Your Net Worth with Homeownership

Take a moment to imagine where you want to be in a few years. You might be thinking about your job, money, wanting more stability, or goals you want to reach soon. Is homeownership a part of that vision? If it is, you should know owning a home has a whole lot of financial benefits.

One of the many reasons to buy a home is that it’s a great way to build wealth and gain financial stability. That’s because the value of most homes increases over time, which in turn grows your net worth. Here’s how home values are rising right now. According to Zillow:

“The total value of the U.S. housing market – the sum of Zillow’s estimated value for every U.S. home – is now slightly less than $52 trillion, which is $1.1 trillion higher than the previous peak reached last June.”

Basically, homeownership is a tremendous wealth-building tool. And with home values back on the rise across the nation, now might be a good time to consider if owning a home is something you want to reach for.

Here’s a look at some data to see how much owning a home can really make a difference in your life.

Household Net Worth Is Rising

Data shows that while those in the top 1% saw the most dramatic net worth increase, people from every single tax bracket have seen their wealth grow over the past few years (see graph below):

 

For many of those people, the rising value of their home plays a big part in that.

Owning a Home Helps You Achieve Financial Success

You can tell homeownership had a lot to do with that growth because there’s a significant net worth gap between homeowners and renters. As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:

 “. . . homeownership is a catalyst for building wealth for people from all walks of life. A monthly mortgage payment is often considered a forced savings account that helps homeowners build a net worth about 40 times higher than that of a renter.”

The big reason why? Homeowner’s build equity. Home equity is the value of your home minus the amount you owe on your mortgage. And for most homeowners, that’s the largest contributor to their net worth. Here’s the data from First American to prove it (see graph below):

The blue portion of each bar represents housing as a portion of net worth – and it’s clearly a bigger contributor than other investments like stocks, gold, and cryptocurrencies. As you can see, across different income levels, homeownership does more to build the average household’s wealth than anything else.

Bottom Line

One of the biggest benefits of owning a home is that it can provide an avenue to grow your net worth. Connect with a local real estate professional so you can start investing in homeownership.

The Latest Expert Forecasts for Home Prices in 2023

Are you thinking about making a move? If so, all the speculation that home prices would crash this year may have you feeling a bit on edge about your decision. Let the data and the experts reassure you. Prices aren’t in a downward spiral and will actually finish the year strong.

Even though you may have heard talk that prices would drop 5, 10, or even 20% this year, that hasn’t happened. The big reason why is the supply of homes for sale is too low. There are just more buyers looking to buy than homes available, and that’s kept prices from falling.

To prove this year wasn’t a bust for home prices, let’s look at the latest 2023 forecast from a number of experts.

Most Experts Project Home Prices Will Net Positive this Year

The general consensus from industry experts is that home price appreciation will actually be positive for 2023. The graph below shows the latest 2023 year-end forecasts from six different organizations:

As you can see, all but one project nationally prices will net positive this year. That’s significant because it shows the majority are optimistic about home price growth.

If you’re still worried about the one red bar that shows an overall price drop for the year, think about this. The projection from the National Association of Realtors (NAR) is for only a slight decline. It’s not the big crash all the headlines called for. Plus, if you average all six forecasts together, the expectation is that prices will net somewhere around 3.3% positive growth for the year.

If these 6 organizations aren’t enough to convince you that prices won’t come tumbling down, here’s something else to consider. One of the six forecasts represented in the graph is the Home Price Expectation Survey (HPES) from Pulsenomics. It combines survey results from over 100 economists, investment strategists, and housing market analysts. The HPES found that the average from all 100 of those experts is 3.3% price growth for the year.

If you look back at the graph above, you’ll notice the blue average for the forecasts in this graph is also 3.3%. While individual forecasts may vary, both the HPES survey and the average of these forecasts provide the same projection. And 3.3% appreciation is a completely different story than prices falling.

Bottom Line

If you’re worried about home prices falling this year, let the experts reassure you. Based on the average of the latest forecasts, home prices will actually show positive growth this year. If you have questions about what’s happening with home prices in your area, connect with a real estate agent.

Stay informed