5 reasons to be thankful in today’s housing market
Lately, people who have used the word “thankful” in reference to the housing market were most likely to be sellers. With home prices rising at a rapid pace over the last year, it’s been a good time cash in on your home equity. But folks looking to buy a home, particularly first-time homebuyers? They haven’t been feeling exactly grateful.
It’s been a roller coaster year and a half, with tight competition pushing home prices to unseen highs. The reasons behind this upheaval are well-known: COVID-19…remote work policies that seem likely to be around for a while…historically low mortgage rates…record low amounts of homes for sale…cabin fever brought on by stay-at-home restrictions…
All of these elements have led to increased demand just as limited supply became a big problem. It’s been the perfect recipe for skyrocketing home prices. But if you’re thinking of buying a home in the next few months, don’t worry. There are plenty of reasons to be optimistic about the current housing marketing outlook. That’s why this Thanksgiving, we’re looking at the parts of the current housing landscape we’re thankful for.
5 good signs in the housing market outlook
- 1. More homes for sale
- 2. The price of lumber is going down
- 3. Open houses making a comeback
- 4. Technology makes buying a home easier than ever
- 5. Mortgage rates remain historically low
1. More homes for sale
Real estate watchers and economists are predicting that more and more homes will be for sale soon. Lawrence Yun, chief economist for the National Association of Realtors®, has already seen the effect of more homes for sale: “Rising inventory and moderating price conditions are bringing buyers back to the market.”
Part of that rise in inventory is thanks to new construction, but perhaps not the types of housing some are hoping for. In August, the number new single-family home construction projects that got started dropped 2.8% from July. But that was offset by more multi-family projects beginning, an increase of 3.9% from the previous month.
This adds up to a lot more homes, single- and multi-family, being built this year than a year ago—a 17.4% increase.
Availability of construction materials continues to be an issue, but builders are seeing a sustained demand for more homes and are working hard to respond to it. Homebuyers eager to stop renting and start owning (and take advantage of low rates) are more open to buying a condo than in previous years.
President Biden’s administration is also working to make it easier to put more available homes in the market. In a series of initiatives announced in early September, the administration announced plans to increase the supply of manufactured homes, reduce zoning restrictions put in place by local governments, rehab and retrofit existing homes and more. We can keep our fingers crossed that the plans can be put into place and make even more of a dent on the housing shortage.
2. The price of lumber is going down
One of the biggest obstacles to building new homes during the pandemic was the unavailability and skyrocketing prices of lumber. We’ve seen supply chain delays with many different types of products, from toilet paper to computer chips, but one of the first categories to get hit was lumber. This was caused in part by slowdowns at mills due to the pandemic, but it was exacerbated by trade wars with Canada, where the U.S. gets a third of its lumber.
All of this happened at the same time that the demand for lumber skyrocketed as well. Homeowners were inspired by all that time stuck in their houses due to the pandemic to finally get around to those DIY projects they’d put off. Others decided to pull the trigger on more major renovations, hoping to create more space in their suddenly too-crowded homes. These two factors caused prices of lumber to surge.
Thankfully, the lumber market is starting to settle back down. The price of a thousand board feet of lumber averaged $349 in April of 2020, before the pandemic hit. It soared to $1,514 in May of 2021. Now, it has come back down somewhat, averaging $770 per thousand board feet. Not where it was pre-pandemic, but almost half the price at its peak. Hopefully, this trend will continue.
3. Open houses making a comeback
There’s nothing quite like actually walking the halls and being in the rooms of a home before you buy it. Online listings are a nice way to see what a house looks like and a fun way to spend some time on the internet, but when it comes to making one of the biggest financial decisions of your life, you’d like to have a little first-hand experience in the house.
Open houses and in-person tours started making a comeback in 2020, after they were put on hold at the beginning of the pandemic. But once more and more people got vaccinated, we’ve started to see more and more open houses.
Now it’s true that different parts of the country have different guidelines for conducting open houses during the pandemic. The National Association of Realtors® advises that fewer than ten people are in an open house at any one time and suggests only letting one buying group tour the home at a time. This is in addition to social distancing and good handwashing as well. So, if you choose to attend an open house, be prepared to follow these rules. And be prepared to enjoy the experience of seeing the home in person again, too.
4. Technology makes buying a home easier than ever
Technology of all sorts has become essential during the pandemic, allowing us to work and connect with others while staying relatively safe and distanced. This is also true in buying a home. From the start of the process all the way to the end, online tools and tech have made sure that buying a home during the pandemic isn’t just possible; it’s easier than ever.
We mentioned above that open houses are making a comeback, but for much of the pandemic virtual tours and online listings allowed prospective homebuyers to see the home without setting foot in it. Many people are still hesitant to enter someone else’s home, so even if they aren’t attending open houses, they can use these online listings to whittle down their options and only choose to tour homes that they think may truly be “the one.”
Making the mortgage process easier
The financing process is almost completely online, from pre-approval to the closing, and has continued to improve. Guaranteed Rate invented the Digital Mortgage, allowing you to apply, get pre-approved and upload all the necessary documents safely online. In the past few years, we’ve added some new features that make the whole process smoother and more seamless:
- MyAccount is your personal dashboard, where you can safely upload sensitive documents, stay in the know on the status of your loan, and complete payments. It puts everything you need at your fingertips.
- FlashClose℠ allows you to review, and in some cases, sign your closing docs in advance of the closing. It turns closing on a house, which used to involve sitting in a drab conference room, signing documents for hours, into something you can do from home in minutes.
5. Mortgage rates remain historically low
Mortgage rates have stayed low for quite some time, longer than most experts expected. National average mortgage rates seemed to have hit their lowest point this past winter when they reached 2.65% for a week. Over this past summer, rates were hovering around 3%. Lately, mortgage rates have been ticking up.
But if you haven’t taken advantage of low rates yet, that doesn’t mean you’ve missed out. While you may not see rates return to their lowest point from this past winter, remember that this last year and a half has seen some of the lowest mortgage rates recorded.
Rates generally stayed above 4% as recently as May of 2019. Just before the pandemic started, rates were in the 3.3% territory, and we were suggesting current homeowners should refinance then. When the pandemic hit, rates plummeted.
Still a good time for a cash-out refinance
Thanks to rising home prices, you may be able to take advantage of current rates while tapping into some of the equity in your home. A recent report from data-giant Black Knight showed that there was $9 trillion in tappable equity in the second quarter of this year. That means that the average homeowner could do a cash-out refinance of their mortgage and withdraw $173,000, while keeping 20% equity in their home. What could you do with that kind of extra money?
Navigating the “New Normal”
Thanksgiving this year seems to mark a pivot point, both for our country and for the housing market.
So much has changed in the last two years. If you look at some parts of the market, you can see that we’re returning to “normal,” like going back to open houses. But if you look at other parts, you’ll begin to see some aspects of buying a home will never go back to where they’ve been, like all the digital tools we use now. That’s why it’s always a good idea to work with an experienced loan officer and other members of your homebuying team to help you navigate this new normal.
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