How to prepare for a slightly cooler summer home buying season, as told by 3 experts

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A preview of the summer 2022 home buying season

Main features for buyers

  • It’s expected to be a strong seller’s market, but it’s cooler than it has been.
  • Home prices are not expected to fall, but they may increase at a slower pace.
  • Real estate trends are local. Work with an agent who has expertise in the areas you want to buy or sell your home.
  • To avoid home buying FOMO (fear of missing out) and panic buying, learn What you can And stick to a realistic budget.

Main routes for sellers

  • It will still be a strong seller’s market, but not as strong as it was earlier this year, and there is less chance of a bidding war that will drive up your selling price.
  • First Preparing to sell your home. A local agent can help determine what repairs and improvements can help sell.
  • Some markets, or submarkets, may be stronger or weaker than others.

Homebuyers haven’t had it easy over the past few years, but there are signs that the peak seller’s market is behind us.

During the home buying season last spring, we saw mortgage rates and home values ​​continue to rise. Both have increased costs of buying and selling a home. “What we’re seeing is probably fewer buyers in this housing market,” said Dr. Jessica Lauts, vice president of demographics and behavioral insights at the National Association of Realtors. While this situation is bad for some buyers, it is a silver lining for the rest as the competition is expected to recover this summer.

This summer’s housing market will still be a seller’s market. Buyers aren’t likely to dominate negotiations or have an easy time finding deals. But buyers should have more time to look at homes and make their offers in some markets.

Less competition does not necessarily mean lower home prices. Housing inventories are still exceptionally low and demand is likely to remain strong. Instead of seeing prices fall, they are expected to grow, but at a slower pace.

If you’re planning to buy or sell a home in the summer of 2022, three experts share what they believe the real estate market will look like and what you can do about it.

Here’s what three experts are saying about the 2022 summer home buying season.

Selma Hep

Selma Hepp, CoreLogic’s Deputy Chief Economist

Slow motion due to high rates.

Our forecast is for home price growth to slow to single-digit appreciation a year from now, says Hepp. That’s about half of what we’ve seen in home price growth. She says you’ll see fewer bidders and homes won’t sell at their current asking price.

Believe and repent

Tendayi Kapfidze, Chief Economist, Bank of America

Strong housing market, but with low home sales and price appreciation

The housing market should remain strong in years of low housing inventory, low unemployment, wage growth and a high number of buyers. However, raising interest rates, says Kapfidze, “makes things less affordable for a lot of people.” This leads Kapfidze to expect slower home sales and less price appreciation, but still a very strong housing market.

Dr. Jessica Lautz

Dr. Jessica Lautz, Vice President of Demographic and Behavioral Insights for the National Association of Realtors

Fewer buyers, but lower inventory

“We’re already seeing signs that the market is taking over,” Dr. Lauts said. This summer, with interest rates rising and home prices rising, fewer buyers will be able to buy a home. While unaffordable housing is not a good thing, it does mean that buyers who are still in the market may have more time to find the right home. But, even if there are few buyers, Dr. Lautz says demand will be strong and inventory will be tight.

Here’s what homebuyers can do about rising mortgage rates and home prices this summer.

Mortgage rates have risen dramatically over the past few months and are now double the all-time lows we saw last year. “We didn’t think rates would be here,” Hepp said. Experts say that inflation is one of the main reasons behind the rise in prices. The most recent data from the Bureau of Labor Statistics shows inflation at 9.1 in June – the highest rate in 40 years. In an effort to control inflation, the Federal Reserve raised short-term interest rates by 50 basis points in May and 75 basis points in June. As inflation remained higher than expected, the Fed raised rates by another 75 basis points in July.

Experts agree not to time the market based on what’s happening with interest rates, but buy a home when the time is right, based on your personal circumstances. “Don’t try to time the market,” says Jody Hall, president of National Mortgage Bankers. “You can’t play a game where you’re betting on interest rates before you’re locked in, or you’re locked in to protect against what might happen tomorrow,” she said. Interest rates rise and fall from time to time, making refinancing an option when mortgage rates fall again.

Today’s rate is now close to 5% to 6%. From a historical perspective, this is not an unusually high level area when a few years ago the “good rate” was around 5%. However, home prices are rising, making home buying affordable for many.

As you prepare to begin the home shopping process, here are some tips to ensure you can secure the best mortgage rate offer in any market.

Compare mortgage lenders

One of the best ways to offset rising rates in the short term is to shop around for your mortgage loan. Don’t deal with just one lender because the loan rate spread can be more than 50 basis points (0.5%) between lenders, says Kapfidze.

The median U.S. home listing price reached $447,000 in May 2022, an all-time high, according to data from Realtor.com. If you can lower your rate by 0.5%, you can easily reduce your monthly mortgage payment by over $100. By comparing offers from multiple lenders, you can choose the offer with the lowest down payment, which can reduce your out-of-pocket costs by hundreds or thousands of dollars.

Do not buy at the upper limit of the pre-approval budget

Regardless of the interest rate, it’s important to have a monthly mortgage payment that you can comfortably afford over the long term. Before you start shopping for a home, get pre-approved and create a mortgage budget to determine how much you can afford to pay each month. Then hold on to it. Just because a lender is willing to give you a certain amount doesn’t mean you have to borrow that much.

If you don’t get caught up in the emotional side of things and feel like you have to get this house, Capfitz says. Going beyond your realistic budget can create challenges for you in the future. Experts recommend limiting your mortgage payment to no more than 28 percent of your pre-tax monthly income.

Build your credit score

When starting the home buying process, start by focusing on your credit score. People often think about their credit score in terms of loan approval, but it affects your interest rate, Kapfidze says. The higher your credit score, the lower your mortgage rate. “If you’re a few months away from buying, you may have some time to improve your credit score,” he says.

Review your credit reports to make sure everything is correct and all potential issues have been resolved. While saving for a down payment, you may also want to pay off revolving debt, such as credit card debt. This lowers your credit utilization ratio and boosts your credit score.

Check out the first time home buyer programs

Eligible first-time home buyers can use these programs to help offset the total cost of purchasing a home. First-time home buyer programs can help with down payment assistance or closing costs. The higher your down payment, the lower the interest rate you can typically earn. To see which programs are available in your state and eligibility requirements, see NextAdvisors guide to first-time homebuyer programs by state.

Expand your home search criteria

When buying a home, don’t limit yourself to just one area. Keep an open mind to include lesser-known areas. Housing prices have sub-markets and sometimes you can find a good house at a cheaper price outside of the city. Also consider fixing up a turn-key ready home. Fixer-uppers and cheap old houses take a lot more work, and more renovation loans, but usually come without competition and bidding wars that we see with turn-key ready houses.

Consider an adjustable-rate mortgage

Adjustable-rate mortgages (ARM mortgages) were not an important mortgage product when mortgage rates were at record lows. But because the mortgage rate isn’t considered “low,” ARM loans have become more attractive. With an ARM loan, such as a 5/1 ARM, you get a “teaser rate” for the first five years, lower than the current market rate, and then switch to a variable market rate after the five-year teaser period. “Follow where rates are and take advantage of the opportunity to upgrade to a fixed rate when interest rates come back,” William Ravis Mortgage Regional Vice President Melissa Cohn tells us.

Preparing to sell during the summer 2022 home buying season

Sellers shouldn’t have a hard time selling their home in this summer’s real estate market. But sellers may need to adjust their expectations and prepare for the summer housing market.

There are reasons to believe it won’t be as easy for sellers as it has been in the past two years. Housing inventory is expected to grow and with fewer buyers in the market, “sellers have to contend with the idea that they won’t necessarily get that premium.” [in sales price] They were waiting,” says Hepp. With that in mind, house prices are not expected to decrease, but rather increase at a slower pace.

When preparing to list your home for sale, consider the local market conditions. The rise of remote work has shifted demand from large cities to smaller metro areas, so one area may have very different needs than another. Work with a local real estate agent to make sure you are pricing your home competitively.

A local agent can help you decide what, if any, improvements or repairs need to be done before listing your home. “People have been watching a lot of HGTV in the last couple of years,” Dr. Lautz said. “You might expect your home to be really nice and bright.” If you know what buyers in your market are looking for and can focus your attention on these things, you will have an easier time getting offers on your home.

How to compare home loans

Whether you’re looking to buy or renovate, you can use this to compare lender offers Home loan comparison tool. You can enter the loan amount, amount, payment and term for each offer and see a real side-by-side comparison of your potential monthly mortgage payment and how closing costs, lender fees and interest rates play out against each over time. Loan provision.

Home loan comparison calculator

Compare your payment options side-by-side to see which one is right for you and your financial situation.

Find the mortgage that’s best for you by comparing the cost of multiple loans over time.

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