Mortgage

US home costs hit a document excessive in 2020. Is Dwelling Shopping for Nonetheless Reasonably priced?

US house prices hit a record high in 2020

The median home price in the US reached its highest ever level in 2020 – just over $ 320,000.

However, don't be put off by higher real estate market prices.

While property values ​​have generally risen, mortgage rates have fallen.

The result is that home affordability may be much better than most people think.

Check your eligibility to purchase a home (October 13, 2020).

Don't worry about rising property prices

The idea that house prices are rising is hard to ignore.

Just look at these current headlines.

US. Home Prices Up 15%, Largest Growth Since At Least 2005 "Redfin" July home sales rose 24.7% as prices hit new highs. CNBC National Association's "Lot Values ​​Hit Record Highs." of Home Builders

If you own a property these headlines are a miracle.

But what if you are a buyer? Should the "Biggest Headlines Ever" scare you off?

The short answer is no.

During these turbulent times, the real estate market was a high point for the US economy. Even if property values ​​continue to rise, low mortgage rates will give buyers more purchasing power.

That way, buying a home has remained largely affordable even during the worst moments of the pandemic.

Check your eligibility to purchase a home (October 13, 2020).

How coronavirus affected the real estate market

It is perfectly natural to assume that house prices would fall this year as a result of the pandemic.

With millions of unemployed closing down and businesses closing across the country, it makes sense to believe that demand would drop and prices would drop.

However, this was not the case in most markets.

Redfin, a national real estate agent, reports a number of measures are strong for the four-week period ending Oct. 4.

House values ​​and sales prices have risen

"Median home sales rose 15% year-over-year to $ 320,625 – the highest in history," said Redfin.

That number marks a period of record growth in US house prices.

To date, "the largest increase ever recorded in the Case-Shiller National House Price Index (which dates back to 1988) was 14.5% in September 2005," said Redfin.

But: "In the week leading up to October 4, house prices rose by 16% compared to the same week last year."

The housing stock remains low

The report adds that "active listings (the number of properties for sale at any point during the period) fell 28% from 2019 to a new all-time low".

"The rate of decline in supply year-on-year has remained constant at this level over the past few months."

This suggests that shoppers are buying homes fast – and demand for inventory has not slowed despite a slowdown in the economy caused by the pandemic.

It has become easier for some to buy a home during COVID

The economic impact of COVID was unevenly distributed.

Buying a home has become more difficult for those who lost work or hours during the pandemic.

But in an odd twist, home buying has gotten easier for some.

In one part of the economy, people can work from home, savings increase and debt decrease. Many of these people see higher credit scores.

According to Ellie Mae, the typical mortgage borrower had a FICO score of 752 in August, up from 728 in April 2019.

A higher credit makes it easier to qualify for a mortgage and a low interest rate.

In addition, it is now possible to view homes online, take video tours and take out a mortgage from the comfort of your own home. This can make the process more convenient for those who are still able to purchase.

Check your new plan (October 13, 2020)

Why are property prices rising so much?

In summary, property prices rose so quickly in 2020 due to soaring demand and low inventory levels.

In a year in which “Shelter in Place” has become the new mantra, many people have begun to rethink where they live.

There is a great wave of home buyers leaving the city and buying in the suburbs for more space and a lower cost of living.

Not only that, but people with well-established households also want to move when adult children move home.

In fact, the Pew Research Center says that 52% of young people – between the ages of 18 and 29 – are now living with a parent or parents.

"Large, expensive, luxury homes make up a larger proportion of homes sold, resulting in a high growth rate for the median sales price," said Daryl Fairweather, Redfin chief economist.

In addition, "remote working is increasing the demand from wealthy people, while middle-income people are more likely to be expected to do their jobs in person, and many are affected by vacations and idle times."

Are property prices falling?

House prices are unlikely to fall in 2020, largely as inventory levels remain low.

Simultaneously with the demand for houses, owners are less interested in selling.

According to the National Association of Realtors, there were 1.49 million units for sale in August – an 18.6% decrease from the previous year.

This is a huge drop in real estate available by the time many people are looking to buy.

"The strong price growth seems to continue … as buyers struggle to outperform each other and bid on a record pool of homes for sale." Jeff Tucker, Senior Economist, Zillow

"The consequences of the month-long inventory shortage will be clearly felt by the national real estate market in the form of a breathtaking price increase this fall," said Jeff Tucker, senior economist at Zillow.

"Our data on closed sales shows sellers appreciated double digits year over year. This is almost unthinkable after prices stalled in the depths of the nationwide lockdowns this spring."

Tucker continues, "The sharp price growth looks set to continue in the near future as buyers struggle to outdo each other and bid on a record pool of homes for sale."

Mortgage rates save the market

Falling mortgage rates are the special sauce for home buyers and keep them in the market even as sales prices continue to rise.

This is possible because lower prices offset higher prices.

For example, imagine a $ 200,000 mortgage at 4.54%. (This was the average 30-year rate for 2018, according to Freddie Mac.)

For a $ 200,000 4.54% mortgage, the monthly capital and interest cost is $ 1,020. At 2.87% (the new record low in October), the same payment covers the monthly cost of a $ 245,500 mortgage That's a $ 45,000 increase in purchasing power, simply due to lower mortgage rates

The catch, of course, is that lower rates work well for those who still have work and income. However, they are less helpful to borrowers who were laid off or suffered financial setbacks during COVID-19.

If you find yourself in the second camp, encourage yourself.

Mortgage rates are expected to stay low well into 2021 – and possibly longer.

Even if your circumstances are preventing you from buying a home right now, you might have a good chance of similarly low prices in a year or two.

And if you are able to buy now, today's price means buying a home is probably still within reach, despite higher home prices and tougher competition.

Check your new plan (October 13, 2020)

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