The Buyer's Guide: Consider this as a Buyer in the Current State of the Market
/As a buyer right now, know that your concerns and feelings are understood. It can be uneasy buying in a shifted market, but this graphic shares a few things to remember as you navigate home buying. With reassurance and support from your realtor, you should have success in buying in any market!
Mortgages are structured differently. The kind of subprime lending that was blamed for the 2008 crash is a much smaller and more regulated part of the market today. “The lenders and regulators do not want to make the same mistake of lending to people who cannot repay the mortgage,” Yun says. “Therefore, the credit scores of mortgage approvals have been high.” The typical credit score for a mortgage borrower was a near-record 776 in the first quarter of 2022. During the Great Recession, it dipped to 707. Plus, for adjustable-rate mortgages, which have fluctuating interest rates over a set period of years, borrowers nowadays must show they can afford the fully reset rate, says Glenn Brunker, president of mortgage servicer Ally Homes.
Housing inventories remain low. The nation is roughly 3 million homes short of meeting buyer demand, Freddie Mac estimates. NAR has called for a “once-in-a-generation response” to the supply crisis. About 1.2 million single-family housing starts are predicted for 2023—still far from the 2 million–plus in the early 2000s, according to Statista data. Yun says housing inventory likely will remain an issue for years to come.
Buyer demand isn’t sapped. Purchasing a house is the top accomplishment postgraduate students aspire to achieve—more than getting a successful job, getting married, having a baby, or traveling, according to a Grand Canyon University survey. “There is still too much real demand and too little inventory,” McGrath says about the state of the housing market. “Affordability has taken a hit with higher [mortgage] rates, but people still want to buy homes.”
Real estate can be a hedge against inflation. Locking in a fixed-rate mortgage now will protect homeowners against future increases in housing prices. Such an opportunity doesn’t exist when you’re renting, and rental prices have climbed drastically over the last year. Plus, renting doesn’t offer the ability to build equity.
A market correction is not the same as a crash. The housing market has showed recent signs of slowing. But “based on present evidence, there is no expectation that a fallout from a housing correction would be comparable to the 2007–09 global financial crisis in terms of magnitude or macroeconomic gravity,” a group of Dallas Fed economists wrote this spring.
Your feelings are understood. Many homeowners remember the 2008 housing crash, when they may have seen their own home’s value plummet or lost their property to foreclosure. Many millennials, who are the strongest homebuying force today, watched their parents struggle to keep up with their mortgage payments, scaring them off their own homeownership path. Their concerns about a “housing bubble 2.0” may come from a deep place, so acknowledge their fear and let them know that their feelings are legitimate.
Source: NAR
