EXCITED ABOUT BUYING A HOME THIS YEAR?
HERE’S WHAT TO WATCH…
As we kick off the new year, many families have made resolutions to enter the housing market in 2019. Whether you are thinking of finally ditching your landlord and buying your first home or selling your starter house to move into your forever home, there are two pieces of the real estate puzzle you need to watch carefully: interest rates & inventory.
Mortgage interest rates had been on the rise for much of 2018, but they made a welcome reversal at the end of the year. According to Freddie Mac’s latest Primary Mortgage Market Survey, rates climbed to 4.94% in November before falling to 4.62% for a 30-year fixed rate mortgage last week. Despite the recent drop, interest rates are projected to reach 5% in 2019.
The interest rate you secure when buying a home not only greatly impacts your monthly housing costs, but also impacts your purchasing power.
Purchasing power, simply put, is the amount of home you can afford to buy for the budget you have available to spend. As rates increase, the price of the house you can afford to buy will decrease if you plan to stay within a certain monthly housing budget.
The chart below shows the impact that rising interest rates would have if you planned to purchase a $400,000 home while keeping your principal and interest payments between $2,020-$2,050 a month.
With each quarter of a percent increase in interest rate, the value of the home you can afford decreases by 2.5% (in this example, $10,000).
A ‘normal’ real estate market requires there to be a 6-month supply of homes for sale in order for prices to increase only with inflation. According to the National Association of Realtors (NAR), listing inventory is currently at a 3.9-month supply (still well below the 6-months needed), which has put upward pressure on home prices. Home prices have increased year-over-year for the last 81 straight months.
The inventory of homes for sale in the real estate market had been on a steady decline and experienced year-over-year drops for 36 straight months (from July 2015 to May 2018), but we are starting to see a shift in inventory over the last six months.
The chart below shows the change in housing supply over the last 12 months compared to the previous 12 months. As you can see, since June, inventory levels have started to increase as compared to the same time last year.
This is a trend to watch as we move further into the new year. If we continue to see an increase in homes for sale, we could start moving further away from a seller’s market and closer to a normal market.
If you are planning to enter the housing market, either as a buyer or a seller, let’s get together to discuss the changes in mortgage interest rates and inventory and what they could mean for you.
Purchasing or selling a home is an exciting and life changing experience, therefore it is important to choose the best Realtor to guide you through the journey. Beverly Tate is that right choice, one who you can trust and who will have your best interest in mind. She has the experience to negotiate on your behalf and guide you through the complex process of purchasing or selling a home.
Beverly is an active member of her community, living and raising a family in San Diego since 1993. She has been a licensed professional Realtor since 2003 so you can feel confident in her ability and experience serving the San Diego neighborhood.
Beverly’s past experience includes earning the 4S Ranch Office Rookie of the Year, her first year in business, and earning distinguished sales awards thereafter. In addition to ongoing education in the real estate field, she completed advanced education to earn the distinguished GRI designation, held by less than 6% of Realtors in California. Beverly places her client’s best interest as her highest priority.
If you have any questions about current market conditions, need a referral for a service, or want to chat about your home, feel free to contact Beverly. She would love to help you with your real estate sale or purchase. She looks forward to hearing from you and providing excellent personal service.