Real estate experts are changing their advice on how and when to buy a home, seeing a new bear market with record high inflation.
Faced with record inflation at 8.6%, US regulators have also raised interest rates, keeping many potential buyers away from an already overheated real estate market.
Some mortgage experts told TheStreet that the housing market remains a tough place to buy or sell a home, even if prices are easing from time to time.
Tabitha Mazzara, director of operations at MBNC, said some sellers are waiting to put homes on the market because they worry they’ll find themselves in the middle of housing by then.
“I wouldn’t sell. If you do, where do you live?” Mazara said.
“With inventory low and demand high, it’s a competitive market,” she says.
“You can make money selling your old house, but you still have to buy a new one, and it’s probably a less or less desirable place,” Mazzara said.
You may not find a home yourself.
Sellers who decide to list their home for sale may also not see much profit.
Because the market is still cooling, sellers may see a bit of a big profit, said Jacob Channell, senior economic analyst at LendingTree.
“Don’t be in a rush to sell your home just because you think you’ll get a higher price than you paid,” Chanel said.
“If the value of your home has skyrocketed, remember that other homes in your neighborhood have done the same.”
“This means that if you sell before you find a new place to buy, you may be priced out of your current market.”
Signs that buyers are finally slowing down can be found in various places, but it is a particularly important parameter for new mortgage applications.
Data from the Mortgage Bankers Association as of June 10 showed that applications for purchase were down 15 percent from the same period last year.
Channel said this is because inflation, higher home prices and newly inflated mortgage rates are winning over interested buyers.
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But even for those reasons, real estate currently remains in the white hot zone.
“While 15 percent is a significant drop, it’s important to note that we’re coming off an unusually warm period for the housing market, so this drop may indicate a return to normalcy as opposed to a sharp decline,” he said. .
So should you wait to get a loan?
Depending on how quickly you need a new home and whether or not you can afford the market, whether or not to take out a mortgage is often a very personal situation.
According to Channel, the warmer months of the year are typically prime home-buying season, and this has caused a bit of a bump in application data from week to week so far.
“But the average interest rate on a 30-year fixed-rate mortgage jumped 55 basis points this week, according to data from Freddie Mac.”
“Therefore, the increase in demand from some home buyers brought by the summer may be offset if prices rise,” he said.
Channel said he expects to see fewer and fewer loan applications as the year progresses and buyers are priced out of the market at higher interest rates.
“As a result of the increase in prices, loan applications may fall more compared to last year,” he said.
Ultimately, everyone is different when it comes to buying a home, Mazara said. For most people, you’re only ready when you’re ready.
“At the moment, not everyone is ready. But because of the limited inventory, there will be high demand in some states like California or Florida,” she said.
Such a supply and demand problem is getting worse as more buyers are looking for it.
“Interest rates continue to rise, and investors continue to enter the housing market in large numbers, which will only increase prices in the long run,” Mazara said.
Buyer beware
If you are considering taking out a loan, make sure you do your homework.
Buyers should be wary of a few red flags that appear on the tail end of an unprecedented real estate boom.
“If there’s a lot of mortgage brokers out there, it’s buyer beware — not a lender, but a broker,” Mazzara said.
“You have a lot of mortgage brokers, squeezed by the collapse of the refi business, advertising rock-bottom interest rates designed to lure borrowers,” she said.
Mazara warns that these types of ads can cause problems.
This is because when a borrower fills out a loan application with these middlemen, they eventually realize that the advertised rate is not accessible to everyone, a “very narrow” segment of society.
“The fine print, for example, shows that the deal is only good for people with a credit score of 780 or higher who can afford a 45% down payment,” she says.
Mazzara says these are “bait and switch” tactics designed to mislead consumers concerned about rising interest rates. That may include advertised prices from brokers that are no longer available.
“Some borrowers may eventually walk away after getting wise to these deceptive tactics, but a delay in financing can cost them their dream home,” she says. “[That’s] A very disappointing situation in such a competitive market.
