Home Prices Are Increasing Despite Higher Mortgage Rates
This BLOG On Home Prices Are Increasing Despite Higher Mortgage Rates Was UPDATED And PUBLISHED On October 17th, 2020
All indicators point to a Real Estate boom the likes we have not seen since the Housing Market peaked in 2005-06. HUD and the FHFA have increased loan limits for two years in a row due to rising home prices.
- In many cities, like New York, San Francisco, and Dallas, home prices are higher now than they were before the crash of September 2008
- Inventory, while low in some areas is misleading depending on the price tag of the house
- A new wave of first-time buyers have been brought into the market as rent prices continue to rise
- Interest rates have risen some spurring a sense of urgency, and the variety of loan products have given a bigger pool of buyers a chance to obtain housing who would otherwise be shut out
- So what is different now?
In this article, we will discuss and cover Home Prices Are Increasing Despite Higher Mortgage Rates.
Home Prices Are Increasing And Highest Level Since Real Estate Crash
The first difference between now and before the crash is a smaller inventory has risen values, and not the products and uncontrolled speculation that followed like before:
- Prior to 2009, appraisals were influenced by other professionals within the industry
- This lead to many homes being overvalued as houses was given automatic seasonal upward adjustments, even if comparable sales of prices supporting it did not exist at the time
- Today there is an automated Collateral Underwriting system that holds appraisers, and lenders feet to the fire because values, increases, and market trends are all documented to support or deny the value
Lenders can no longer speak with the appraiser, and he/she is left alone to determine an unbiased value based on objective data.
Changes In Mortgage Guidelines
The second difference is down payment and income verification.
- Gone are the days where people could purchase one home, or multiple at the same time without a down payment
- FHA loans require 3.5%, Fannie and Freddie 5% in most cases, and Jumbo mortgages at least 10
- If 3.5 percent does not sound like a lot, it makes a world of difference in the eyes of a homeowner who sees the first sign of hardship and may decide to walk away
- The more they put into the home, the less likely they are to walk away, and even more important, the more they think about their purchase before signing on the dotted line
- Prior to 2007, no money down homes with no income verification accounted for a large percentage of home buys, and an even larger percentage of home foreclosures
- Today you need a down payment, and you need to show you are making money, filing taxes, which show you have the Will, and ability to buy a house
For about three years, cash purchases accounted for 50% percent of home sales (2008-2011).
Types Of Home Buyers And Home Prices Are Increasing
The third difference, which is from my own observation, people are a little more frugal Millennials, who make up the largest percentage of the population and new home buyers, saw what their parents went through ten years ago.
- Many still have student loans they have to pay off and are looking for smaller places with lower prices
- When buyers would become qualified
- Real estate and lenders would come to some sort of agreement of how much they could qualify for, and the agent would find the house at the peak of their budget
- These buyers are smarter and are not looking for fixer-uppers, or home projects, which are discretionary obligations that have bankrupted many new homeowners already leveraged out on their disposable income
The bottom line is the market is high, and affordability is being outpaced by the prices of homes, and the costs associated with the home like Real Estate taxes.
This BLOG On Home Prices Are Increasing Was UPDATED On October 17th, 2018