Before homebuyers completely despair, there are a few helpful things to keep in mind. While affordability may not be changing much, there is less competition for homes. Right now, there are an average of 2.4 offers for a house compared to 5.5 offers earlier this year.
Sellers aren’t going to slash prices, but they are realizing that they have to make more of an effort to attract buyers—like spending money to freshen up their homes, says Jessica Lautz, deputy chief economist for the National Association of Realtors. For buyers, less competition means they don’t have to deal with some of the craziness of the last couple of years, such as losing out to other bidders who were willing to waive home inspections and make other big concessions.
Ultimately, it’s first-time buyers who are most likely to feel the weight of home prices staying elevated. That’s because they’re the ones who have to come up with the funds for a down payment. As hard as it may be, giving up on what could have been is the first step. It’s better to refocus search parameters and make peace with buying a cheaper home, perhaps farther from work or a fixer-upper, rather than hoping for the market to nosedive or rates to come down.
Existing homeowners, especially those who have lived in their homes for a while, have likely benefited from home price appreciation and can use proceeds from a sale for their down payments. As such, mortgage rates—not home prices—are often a bigger deal for homeowners looking to move. And unlike with the price of a house, there are options to reduce one’s rate—from adjustable-rate mortgages to refinancing if rates fall.
But a homebuyer can’t bank on rates falling. If you’re worried about the monthly payment, make a bigger down payment if you can, or pay an extra point or two (which is a fee paid to the mortgage lender) to effectively buy the interest rate back down.
Ultimately, when searching for a house, buyers should expect home prices and mortgage rates to be more or less where they are today
Alexis Leondis is a Bloomberg Opinion columnist covering personal finance. Previously, she oversaw tax coverage for Bloomberg News.
This article was provided by Bloomberg News.