First Time Home Buyers Drive Sales
Last year’s seller market was crazy in many parts of the US, even small suburbs saw houses fly off the market in a matter of days. Multiple offers were common as competition between home buyers was fierce and many were offering way over the asking price in many instances.
Now that the new Spring season has begun, inventory begins to grow. More inventory is leading the shift from a sellers’ market to a soft buyers market. That will have the added affect of slowing down the pace of rising home prices and usher in a “leveling off” if you will. Already, we are seeing more “wiggle” room and a willingness to negotiate on price between buyer and seller that was nearly non-existent last year.
There will always be exceptions. So, while you may see a softening of home prices in one area, another could still be operating under a “sellers’ market”. It all depends on location, location, location.
How can you tell which category your local market is in? Take a look at the days on market. That is, how long have listings in your area been sitting on the market waiting for a buyer? If your planning on purchasing in an area where homes are selling in just days vs weeks, then you’ll need to be prepared to act quickly and expect to pay close to full price.
Millennials have taken much longer to obtain traditional milestones than previous generations before them. They include getting married, having children and buying a home.
A big part of that traces back to the 2005/06 market crash. College graduates were left holding the bag with huge school loans over their heads and no respectable job prospects available to them.
In fact, in the following years, we all heard and experienced that young adults, couldn’t afford to move out of their parent’s house. Many of us were working a minimum of two part-time jobs on average just to make ends meet. Put that in sharp contrast to our economy today, where there is a surplus of job openings throughout the U.S. and wages are starting to rise
In fact, over the past nearly three years, home ownership rate continues to climb along with great job numbers. Last year, the huge serge of Millennial homebuyers
History shows that most people tend to buy their first home around 30 years of age. An additional 5 million millennials will turn 30 in the next two years.
Over 33% of the millennial generation are considered “Mortgage Ready”. Thats 46 million millennials who already meet the qualifications to be approved for a home mortgage today.
The 2019 Aspiring Home Buyers Profile recently released by the National Association of Realtors revealed that 84% of non-owners want to own a home in the future. That percentage increased from 73% earlier last year.
Slowly, renters are starting to look into what qualifications are needed for mortgage approval. These qualifications include:
- A FICO Score of 620 or higher
- A Back-End Debt to Income Ration less than or equal to 25%
- No foreclosures or bankruptcies in the last 7 years
- No severe delinquencies in the last 12 months
As more millennials are realizing they can afford a home now the steady stream of first time homebuyers will continue into the forseeable future. According to data from Realtor.com, first-time homebuyers accounted for 42% of new home loans in December 2018.
We now know there are millions of buyers with the income and credit necessary to qualify to buy a home. The biggest question is: Do they know it
?…Unfortunately, many renters don’t investigate simply because they don’t believe it’s an option. homeonwership
Negative Media Keeps First-Time Homebuyers In The Dark
Today’s economy is booming, the stock market has had 22 record highs and counting. Job numbers are the highest they’ve ever been in 44 years and mortgage rates are holding steady at 4.41% for a 30 year fixed rate mortgage. So why all the negative press?
Seems nearly every headline has to have a negative spin to it. The media is responsible for far too much negativity, ignorance, and strife in this world. Even good news is headlined with a negative spin. Here are some recent examples from mainstream media:
“Cash-out refi’s are back – will homes become ATMs again?”
The real story: Although the headline is accurate, to a point. It’s true that the percentage of refinance in which a homeowner can receive cash at the closing has matched the same levels that existed in 2006. However, the actual amount of equity homeowners actually “cash out” compared to a decade ago isn’t even close.
The dollar amount cash-out last year was $63 billion. Seems like a lot until you put it into context. Compare that to 2006 when homeowners cashed out $321 billion, more than five times the current amount.
Unlike 2006 when homeowners were using the cash-out money for lavish vacations, new cars, etc. Todays cash out equity is being used to consolidate debt, as seed capital for a new business or college tuition.
“Consumer Debt Hits $4 Trillion…Americans Are Diving Deeper & Deeper Into Debt
The real story: The first part of the sentence is correct however, the second part is far fetched. Total consumer debt is the highest its ever been because the population continues to grow and so do prices and wages.
The important number is how the total debt ranks as a percentage of disposable personal income. That percentage is the lowest ever recorded! People are not “diving deeper and deeper into debt”. In fact, the exact opposite is true. They have less debt today than ever before.
Interest Rates Hold
2018 saw interest rates tick up three different times. However, they are currently holding steady at 4.41% we don’t know how long that will last. Smart homebuyers will lock in their rates now since they are predicted to rise again at some point this year and into 2020.
“You might work for three months to burnish your credit and then find that the rate has risen so much that it doesn’t make a difference.'” says Jason Lerner, VP George Mason Mortgage, MD.
Just a small interest rate hike can make a big difference. The difference between a 5% interest rate and a 5.5% rate is $93 a month extra on a $300,000 mortgage note. If you’re thinking of waiting a while longer to build up your credit or a larger downpayment, the rate hike you encounter later may negate those efforts altogether.
I think it’s fair to say, the longer you wait, the more you will pay.
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