7 reasons to be thankful in this year's housing market
Thanksgiving is on the horizon, a time of food, family, and turkey-induced power naps. It's also that time to count our blessings and consider the things we are thankful for during the year. From a housing perspective, this year has certainly been...interesting. We've covered the specifics elsewhere on the website, but suffice to say it's been a time with no small amount of uncertainty, and a wavering of trends that have been going strong since before the pandemic.
That's not to say that it's all been negative — far from it. In fact, there are many signs of a market that's settling in for more long-term viability, while new exciting avenues and opportunities are opening up for homeowner and homebuyer alike. It's fitting because the holidays have always been about possibilities.
So, as we look back on 2022, as well as look forward to 2023, we thought we would discuss the things going on in the mortgage industry that cause us to be grateful. With that in mind, here are seven reasons to be thankful with this year's housing market.
Home prices cooling (and inventory's increasing)
Home prices have reached dizzying heights the last few years, which has made it difficult for first-time homebuyers to find a home of their own. Even those with a home who wanted to upgrade their space have had to make many concessions in this seller's market. While the market still heavily favors the seller, there are signs of home prices reaching a 'cooling off' period. This is above and beyond the expected drop when the summer selling season comes to a close.
According to Housing Wire, home price averages are down by 2% or around $8,800 from the peak it saw in June of this year. While 2% may not seem like much, it can wind up making a significant difference over the life of, say, a 30-year fixed rate loan. We may be seeing an emerging trend where housing prices may come down to a level where newcomers may have an easier time realizing their dreams of homeownership — definitely something both buyers and sellers can be thankful for.
At the same time, homebuilders and new home listings have increased housing inventory, the lack of which has been a critical factor in almost every housing market across the country. While supply has not been able to keep up with demand, inventory historically picks up in the months after Labor Day. This gives house hunters an incremental, though much-needed break in their search to find their dream home.
High home equity
Even if home prices have seen a drop, home equity is still riding high. A report by CoreLogic in September shows that the total average equity per homeowner reached an unprecedented $300,000. This creates a perfect opportunity for homeowners to leverage that equity surge into any number of home or personal projects, such as debt consolidation (medical, student or otherwise), home renovation, college tuition and more.
One of the most common ways to tap into your home's equity is through a HELOC (home equity line of credit). We've discussed this before in detail, but briefly a HELOC acts as a credit card that is connected to your home's equity. It's an ideal option if you anticipate needing to tackle a variety of projects over the next few years, or if you just want to have a ready reserve of funds handy for whatever life throws your way. With the incredible level of home equity seen all across the country, you'll have plenty to work with if you tap into it. In any case, high home equity is something that all homeowners can be thankful for.
Adjustable-rate mortgages (or ARMS for short) have proven especially popular over the last year or so. Interest rates play a large part of that as homeowners look for options that will allow them to get their proverbial foot in the door and save money in the short-term. This is especially true of homeowners who don't plan to stay in their homes for the long term.
The initial savings offered by ARMs might allow a potential homebuyer to afford a much larger or more luxurious home than they would with other loan options. It's also possible to refi your ARM in the future when rates and market conditions are more favorable to you. While ARMS certainly aren't for everyone, for those seeking the initial flexibility and increased affordability, they can be greatly appreciated for what they bring to the table.
Lock 'N' Roll
A relatively new loan product for us, Lock 'N' Roll loans allow you to lock in your rate for 60, 75 or 90 days with no upfront fee while you are looking for a home. If housing rates go up, you keep the rate that you've locked in for the chosen duration. The best part? If rates go down, you can renegotiate to match the current, lower rate.
Beyond that, you can apply Lock 'N' Roll to fixed, FHA, VA and USDA loans, covering virtually every property type. This allows you a measure of peace of mind as you look for a home, so you don't have to get in a rush before rates change. Overall, isn't that something we all look for during this time of year?
Rates are still low
You may have seen any number of headlines in the news about rising housing rates. While they aren't wrong, the hyperbole at times can be a little misleading. Rates have definitely risen from where they were a year ago, but it's hardly time to hit the panic button. In fact, historically speaking, rates are still quite low.
It may be hard to believe, but the average mortgage rate since 1971 is 7.76%. Back in the early '80s, the rate was over 18%! So, even with the gains that mortgage rates have made this year alone, we are still holding under the historical average. Of course, we don't know precisely where rates are going in 2023, but for the moment they are still low. That's definitely a cause for gratitude.
If you are planning either a large- or small-scale renovation of your home, one major obstacle you simply have to overcome is scheduling. The spring and summer months are the peak season for renovations while the weather is good and the sun is shining. Demand for workmen and building materials can taper off dramatically as the days get shorter and the temperature drops, however.
This makes fall, and even winter, the ideal time to book contractors and work crews for those updates or repairs. It winds up working out well for both you and them, as work can be scarce during the later months of the year, so it's win-win for both parties involved — you get a more convenient renovation schedule, and they get work in the off season...something that both sides will welcome at this time of the year.
Cutting-edge financial technology
Financial technology (or 'Fintech') has come a long way, even in the last few years. Instead of having to plow through tons of hardcopy documents, now you may be able to handle most, if not all, of it from your computer, or even your phone! This kind of technology platform allows for all sorts of conveniences, and it can significantly reduce the time it takes to close your loan.
In our case, we bring those options to you using our proprietary FastTrack platform. With it, we put you in the fast lane by having one person handle both the processing and the underwriting. How fast is it? Qualifying homebuyers could be clear to close in as little as 24 hours*, with final closing on their dream home in as fast as 10 days**.
As technology continues to improve, you can bet that we will integrate it into the mortgage process to bring you a greater level of service and support. Our goal, as always, is to bring you world-class mortgage services at every point and step of the way, and a platform like FastTrack is just one way that we are able to deliver an unparalleled experience — every time.
Considering all the factors that affect the housing market, we can be thankful of where it is now.
Sure, there are many ups and downs that play into this, many conditions and unknowns that we have to consider, but at the end of the day, the housing market is still in a good place: Homeowners still have plenty of home equity to work with, as well as a greater pool of resources to renovate and update their homes; homebuyers have increasingly more options to buy and a greater inventory to choose from in the market.
Taken together, that means that we have a housing environment where everyone involved has at least some advantages that they can use to bring about their own unique vision of homeownership.
We can all surely be thankful for that.
*The Guaranteed Rate FastTrack provides that eligible borrowers will receive a "Clear to Close Loan Commitment" ("CTC") within twenty-four business hours from Guaranteed Rate's receipt of all necessary borrower documentation. Guaranteed Rate reserves the right to revoke this "CTC" at any time if there is a change in your financial condition or credit history which would impair your ability to repay this obligation. CTC is subject to certain underwriting conditions, including clear title and no loss of appraisal waiver, amongst others. Read and understand your Loan Commitment before waiving any mortgage contingencies. Borrower documentation and Intent to Proceed must be signed within twenty-four business hours of receipt. Not eligible for all loan types or residence types. Fixed rate conventional loans on single family residences only with at least 20% down payment. Eligible for primary and second homes. Property must be eligible for an Appraisal Waiver and borrower must opt in to AccountChek for automated income and asset verification. Self-employed borrowers and Co-borrowers are not eligible. Not all borrowers will be approved. Borrower's interest rate will depend upon the specific characteristics of borrower's loan transaction, credit profile and other criteria. Offer not available from any d/b/a or operations that do not operate under the Guaranteed Rate name. $250 Closing Cost Credit is available from 5/1/22 through 11:59 PM, 12/31/22 and is applied at closing, no cash value. Not available in New York, West Virginia, Kentucky, or Texas. Restrictions apply. Contact Guaranteed Rate for more information.
**Guaranteed Rate cannot guarantee that an applicant will be approved or that a closing can occur within a specific timeframe. All dates are estimates and will vary based on all involved parties level of participation at any stage of the loan process. Contact Guaranteed Rate for more information.
Guaranteed Rate is a private corporation organized under the laws of the State of Delaware. It has no affiliation with the US Department of Housing and Urban Development, the US Department of Veterans Affairs, the Nevada Department of Veterans Services, the US Department of Agriculture, or any other government agency. No compensation can be received for advising or assisting another person with a matter relating to veterans’ benefits except as authorized under Title 38 of the United States Code.