Thanks to a record number of price cuts and major improvements in mortgage rates, home buying conditions have improved tremendously.
Overall, you may be able to get a lower purchase price and finance the property with a mortgage rate approximately .50% lower than what was offered last month.
Does this mean it’s time to rush out to buy a home? Or does it continue to pay off to be patient?
Personally, I’m still in favor of not rushing, but if you see something you like, the price can be reduced a little.
And competition may decrease as the year winds down as buyers become busy with other things.
Unseasonal increase in inventory for sale due to decline in asking prices
Redfin reported this morning that there are some “rays of hope” emerging for potential home buyers.
The first is that new listings during the four weeks ending Nov. 5 increased 1.5% from a year earlier.
This was the second such increase since July 2022, evidence of a persistent undersupply problem in the housing market.
He said this increase is partly because new listings were declining during the same period last year.
Additionally, active listings are at their highest level since the beginning of 2023, and months of supply increased 0.2 points to 3.6 months.
Inventories nationally remain limited, generally indicating a healthy supply of 4 to 5 months. But it is increasing, which seems to be reducing the prices.
And the share of homes listed with price declines rose to 6.8%, a new record high.
However, the average asking price was still $379,725, up 4.9% from a year ago, the largest increase in a year.
This means the average monthly mortgage payment remains close to an all-time high of $2,732, assuming a 7.76% 30-year fixed mortgage rate.
The monthly mortgage payment reached an all-time high two weeks ago when it was $8 higher.
Total housing payment is 10% higher than a year ago
When you take into account higher asking prices and higher mortgage rates, total housing payments are still up 10.6% year-over-year.
So despite increased inventory and rising price cuts, it is not as if discounts are being offered.
The only real improvement has been a decline in rates, which has boosted affordability in an otherwise bleak environment.
If you zoom out and look at all of 2023 and ignore the month of October, mortgage rates will be near their highest levels of the year.
In other words, while affordability has improved from a month ago, it remains at/close to its worst levels of the year.
Thus, buyers may find it beneficial to wait for prices/rates to come down further.
This contradicts the advice of Redfin economists, who “recommend that serious home buyers consider looking at mortgages now.”
Economists, like many others, are cautious regarding mortgage rates and worried that they could easily reverse course.
They cite the upcoming CPI report, which will be released on November 14. If you point out that inflation increases again, mortgage rates may climb again.
And they’re not wrong that it’s much easier for mortgage rates to go up than to come down.
Mortgage lenders are generally defensive in their pricing. They are happy to raise rates without hesitation, but are reluctant to lower them, even if the data supports it.
So if you’re very far along in the home buying process, it may make sense to lock in a mortgage rate and avoid taking the risk.
Prices and rates may continue to fall till December
It may be wise to continue waiting to buy a home, as the downward pressure on mortgage rates finally appears to be easing.
Additionally, housing inventory is increasing at a time of year when it typically is not, indicating potential upcoming weakness on pricing.
This means it may be beneficial to take your time in buying a home, rather than buying a house at a slight discount to recent levels.
A while back, I dug into Freddie Mac data and found that mortgage rates are lowest in December.
The 30-year rate averaged 5.97% in the month of December, which is about 0.25% lower than the 6.18% rate typically seen in the months of April and May.
Those are also the months when homes sell for the most money as it is the traditional spring home buying season.
There are more buyers, more demand, bidding wars and competition have increased, and there are higher rates.
So there can certainly be an argument to be made about buying a home in the later months of 2023, at least compared to other recent months.
But overall, it still seems like it is not a good time to buy a home, at least from an investment perspective, in most areas of the country.
And according to Zillow, it now takes more than a decade to sell a home for a profit.
Until asking prices and mortgage rates come down, it may be beneficial to continue waiting for improvements.