This week’s Highlights:
- Mortgage Rates keep creeping up
- Home value also continues to rise
Mortgage rates continue to creep up
Freddie Mac’s chief economist said this week, “Optimism continues as the economy slowly regains its footing, thus affecting mortgage rates.” He goes on to say the rates continue to rise despite remaining near historic lows. When combined with rising home prices fueled by demand and low inventory, these rising rates limit how competitive a potential home buyer can be and how much house they are able to purchase.
Frankly, I disagree with that last part. Rising home prices have way more of an influence on buying a home than rising rates do.
Rates were above 3% at the beginning of the pandemic. They didn’t dip below three until July, 2020. Home value continues to rise, which will make it difficult for many to buy homes, despite the fluctuating rates.
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Where have all the homes gone?
One of the biggest contributing factors to buying a home is the fact that there simply aren’t as many homes available. Why?
Reason 1: There simply haven’t been as many homes built in the past decade as in previous years. This issue isn’t going away any time soon. We’re several million housing units short while the population continues to grow, and there isn’t as much space to build homes because so many homes have already been built.
Reason 2: Baby Boomers are the largest demographic of homeowners. They are also largely unwilling to uproot and move in the middle of a global pandemic. That means when people are usually moving around, there was a huge population choosing to stay put, so those homes were unavailable for purchase when they otherwise would be.
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Home Values continue to rise
We got an email from a client saying he and his wife had been looking for a while, but they’re having a hard time finding anything in their price point. I decided to take a look at what’s available. I did a quick search on the MLS to see what was available in the $100k and $300k price range. At the time of my experimental search, there were 619 active listings in Milwaukee County. Only 103 homes in Milwaukee did not have offers, and only 10 in West Allis had no pending offer. That’s a very small percentage of homes that are actually available. This is the epitome of decreased supply while demand is high, which makes it feel like it’s impossible to find anything.
There’s also a matter of affordability. The hot neighborhoods are always going to be more expensive than those that have less home-buying traffic. When we look at affordability, we’re really asking 2 things:
- What amount can we approve the home buyer for?
- How much does the home buyer actually want to spend?
There’s also a genuine fear of inflation right now. We’ve got another stimulus package that’s about to hit, and the government’s hope is that people will go out and spend it to boost the economy. Depending on what happens with that, we might be seeing more housing market shifts in the future.
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