Buyer Activity Is Up Despite Higher Mortgage Rates
If you’re a homeowner thinking about making a move, you may wonder if it’s still a good time to sell your house. Here’s the good news. Even with higher mortgage rates, buyer traffic is actually picking up speed.Data from the latest ShowingTime Showing Index, which is a measure of buyers actively touring homes, helps paint the picture of how much buyer demand has increased in recent months (see graph below):As the graph shows, the first two months of 2023 saw a noticeable increase in buyer traffic. That’s likely because the limited number of homes for sale kept shoppers looking for homes even during colder months.To help tell the story of why the latest report is significant, let’s compare foot traffic this February with each February for the last six years (see graph below). It shows this was one of the best Februarys for buyer activity we’ve seen in recent memory.In the last six years, we saw the most February buyer traffic in 2021 and 2022 (shown in green above), but those years were highly unusual for the housing market. So, if we compare February 2023 with the more normal, pre-pandemic years, data shows this year still marks a clear rise in buyer activity.The uptick in buyer traffic is even more noteworthy considering the increase in mortgage rates this February. The Freddie Mac 30-year fixed mortgage rate rose from 6.09% during the week of February 2nd to 6.50% in the week of February 23rd. But even with higher rates, more buyers were looking for a home.Jeff Tucker, Senior Economist at Zillow, says the increased buyer activity could continue:“More buyers will keep coming out of the woodwork. We always see a seasonal uptick in home shoppers in March and April . . .”If you’re looking to sell your house, seeing buyers still active in the market this year should be encouraging. It’s a sign buyers are out there and could be looking for a home just like yours. Working with a real estate professional to list your house now will help you get your home in front of eager buyers today.SBottom LineRising foot traffic is a bright spot for this year’s housing market and indicates that buyers are looking to purchase this year, even with higher mortgage rates. If you’re ready to sell your house, partner with a real estate professional.
A Recession Doesn’t Equal a Housing Crisis
Everywhere you look, people are talking about a potential recession. And if you’re planning to buy or sell a house, this may leave you wondering if your plans are still a wise move. To help ease your mind, experts are saying that if we do officially enter a recession, it’ll be mild and short. As the Federal Reserve explained in their March meeting:“. . . the staff’s projection at the time of the March meeting included a mild recession starting later this year, with a recovery over the subsequent two years.” While a recession may be on the horizon, it won’t be one for the housing market record books like the crash in 2008. What we have to remember is that a recession doesn’t always lead to a housing crisis.To prove it, let’s look at the historical data of what happened in real estate during previous recessions. That way you know why you shouldn’t be afraid of what a recession could mean for the housing market today. A Recession Doesn’t Mean Falling Home Prices To show that home prices don’t fall every time there’s a recession, it helps to turn to historical data. As the graph below illustrates, looking at recessions going all the way back to 1980, home prices appreciated in four of the last six of them. So historically, when the economy slows down, it doesn’t mean home values will always fall.Most people remember the housing crisis in 2008 (the larger of the two red bars in the graph above) and think another recession will be a repeat of what happened to housing then. But today’s housing market isn’t about to crash because the fundamentals of the market are different than they were in 2008. Back then, one of the big reasons why prices fell was because there was a surplus of homes for sale at the same time distressed properties flooded the market. Today, the number of homes for sale is low, so while home prices may see slight declines in some areas and slight gains in others, a crash simply isn’t in the cards. A Recession Means Falling Mortgage RatesWhat a recession really means for the housing market is falling mortgage rates. As the graph below shows, historically, each time the economy slowed down, mortgage rates decreased.Bankrate explains mortgage rates typically fall during an economic slowdown:“During a traditional recession, the Fed will usually lower interest rates. This creates an incentive for people to spend money and stimulate the economy. It also typically leads to more affordable mortgage rates, which leads to more opportunity for homebuyers.” This year, mortgage rates have been quite volatile as they’ve responded to high inflation. The 30-year fixed mortgage rate has hovered between roughly 6-7%, and that’s impacted affordability for many potential homebuyers. But, if there is a recession, history tells us mortgage rates may fall below that threshold, even though the days of 3% are behind us.SBottom LineYou don’t need to fear what a recession means for the housing market. If we do have a recession, experts say it will be mild and short, and history shows it also means mortgage rates go down.
Why Buying a Home Makes More Sense Than Renting Today
Wondering if you should continue renting or if you should buy a home this year? If so, consider this. Rental affordability is still a challenge and has been for years. That’s because, historically, rents trend up over time. Data from the Census shows rents have been climbing pretty steadily since 1988. And, data from the latest rental report from Realtor.com shows rents continue to grow today, even though it’s at a slower pace than we saw at the height of the pandemic:“In March 2023, the U.S. rental market experienced single-digit growth for the eighth month in a row . . . The median asking rent was $1,732, up by $15 from last month and down by $32 from the peak but is still $354 (25.7%) higher than the same time in 2019 (pre-pandemic).”With rents much higher now than they were in more normal, pre-pandemic years, owning your home may be a better option, especially if the long-term trend of rents increasing each year continues. In contrast, homeowners with a fixed-rate mortgage can lock in a monthly mortgage payment for the duration of their loan (typically 15-30 years). Owning a Home Could Be More Affordable if You Need More SpaceThe graph below uses national data on the median rental payment from Realtor.com and median mortgage payment from the National Association of Realtors (NAR) to compare the two options. As the graph shows, depending on how much space you need, it’s typically more affordable to own than to rent if you need two or more bedrooms:So, if you’re looking to live somewhere where you have two or more bedrooms to accommodate your household, give you more breathing room to spread out your belongings, or dedicate the extra space to practice your hobbies, it might make sense to consider homeownership.Homeownership Allows You To Start Building EquityIn addition to shielding you from rising rents and being more affordable when you need more space, owning your home also allows you to start building your own equity, which in turn grows your net worth. And, as home values typically rise over time and you pay off your mortgage, you build equity. That equity can set you up for success later on because you can use it to help fuel a move to an even bigger space down the line. That’s why, according to Zonda, the top reason millennial homeowners bought their home over the past year was to build their own equity instead of someone else’s.SBottom LineIf you’re trying to decide whether to buy a home or continue renting, work with a trusted real estate agent to explore your options. With rents rising, it may make more sense to pursue your dream of homeownership.
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