Memoirs of a Loan Officer -The Housing Market :The Good, The Bad, and the Interest Rates

"Unprecedented", "New Normal", and "Shift"-three terms we all became painfully aware of as the world navigated a global pandemic. The world suddenly realized-Hey, this thing might be real and wow, this is going to change everything. Housing market included.

2020

At the epicenter of chaos and confusion the Fed dropped the rate to 0 and overnight we were in a refinance frenzy.  Everyone and their mom (literally) rushed to take advantage of historically low interest rates, lower monthly payments and tap into heightened equity. Homebuyers who were able to obtain financing for homes they otherwise wouldn't have been able to afford, still struggled with multiple offer situations and safety precautions hindering realtors to do what they do best; show homes. Never the less, the housing market continued to boom and inventory stayed significantly low. 

2021

As we headed into our second year socially distanced, rates hovered, and inventory remained low. Realtors and loan officers adjusted to the new normal and swiftly operated with pandemic efficiency, accommodating virtual tours and picking up loan documents off doorsteps. The world continued to go round and houses continued to sell. One thing we know for sure now more than ever-Low inventory in combination with high demand breeds competition.

Multiple offer situations and additional down payments to cover low appraisals became the new norm. Investors, second home seekers and first time homebuyers found themselves fighting over the same few houses on the market. Homebuyers expected to pay well above list price for any home they had their eye on and equity skyrocketed. Homeowners were able to tap into equity to consolidate debt and/or purchase new homes, stimulating the market. All with the lingering question, as my kids would say, "is the virus gone yet?" -and the housing market continued to soar.

2022

The availability of vaccines and more information slowly began to morph our world back into pre-pandemic times. And here we are, caught in the middle, the beginning of reverting back to "normal" and the feeling that life may never be the same again. So where does that leave the housing market? Great question.

In effort to tame inflation, the fed announced that they would be raising the rate in small increments throughout the year, thus diminishing purchasing power and landing us right back into pre-pandemic times. Talk about a major shift.

First time homebuyers who obtained homeownership in 2020 saved apprx $300-$500 a month than buyers purchasing a home today at the same price point-not including inflation. Experts say the average equity gain in 2021 was upwards of 55k per household. The truth? The cost of waiting can be significant.

What now?

Unfortunately, Rising rates will ultimately take some buyers out of the market. This will subsequently lead to less demand- in theory. It is very tough to predict the future, especially in the volatile world we live in today- but higher rates and slightly lower demand should indicate less competition, and somewhat of a cool down for the exasperated shoppers. Will the rising rates lead to lower house prices? Possibly. However, experts agree it is unlikely to be significant due to the overwhelming lack of available housing.

Still a good time to buy?

While higher rates can seem daunting, they are still historically low all things considered. Talk to anyone who purchased a home in the 80's or 90's when rates were in the teens-before my time, but pretty hard to imagine. What the market experienced over the last two years was in fact unprecedented. The adjustment back to pre-pandemic times may have given us whiplash, but the truth is simple; Homeownership is certainly obtainable.

For homebuyers

While homebuyers who waited to purchase may feel like they missed out on those fantastic interest rates, the cost of waiting for the market to "turn" can be massive. A housing payment is practically inevitable- it's just a matter of whose mortgage you want to pay, your own, or the person you are renting from. Knowledge is power and the right team can make all the difference in this forever changing market.

Here's a few tips

1. Take advantage of homebuyer assistance programs when needed -there are several loan products available that are meant to help. Working with a local, seasoned loan officer can make a huge difference in structuring your mortgage to help you win in a multiple offer situation
2. Know your budget. Speak with a local loan officer prior to falling in love with a home. Come up with a budget and stick to it.
3. Work with a local realtor who understands your specific market and how to navigate getting an offer accepted that you're comfortable with.
4. Trust the process-Most of the time when it's "the one" it will work out
5. Save. Save. Save. a few thousand dollars can win an offer, we see it often.
6. Don't get discouraged. The market can be overwhelming at times, but, buying a home is not an easy feat. Industry professionals are there to guide you through the process, find ones that you are comfortable with and have your best interest at heart.

Reach out for guidance, anytime. Promise, its not as scary as they make it seem.

Ashlee Cameron

NMLS 1377661

Branch Manager/Mortgage Loan Officer

360-900-9590