Thursday, 19 May 2022

When Will We See Another Buyer’s Market?

When Will We See Another Buyer’s Market?
29 Dec

Home sellers have been getting a lot of love from the housing market these days, thanks to trends that include home price appreciation and low inventory. But is it likely that we will see a buyer’s market anytime soon, or should we get comfortable in the current climate that benefits sellers?

Whenever the housing supply outpaces the demand that housing, it means we’re experiencing a buyer’s market. Price trends can dictate what type of market we’re in, as well.

“Any time you’re having price declines, that’s a buyer’s market, because the buyer has more negotiating power,” explained Tendayi Kapfidze, chief economist at LendingTree, MagnifyMoney’s parent company, “and any time you have rising prices, that’s a seller’s market.”

The U.S. housing market today

Both mortgage interest rates and home prices have been trending upward for a while now. Interest rates averaged just below 4% at the top of 2018 and are now moving closer to 5%. As of Dec. 20, the 30-year fixed-rate conventional mortgage averaged 4.62%. A year ago, the average rate was 3.93%, according to Freddie Mac’s weekly Primary Mortgage Market Survey.

Another measure — the Mortgage Bankers Association’s weekly Mortgage Applications Survey — reported that the average 30-year fixed conventional loan was 4.94% for the week ending Dec. 14.

Nationally, home prices rose 5.5% year-over-year, based on data from the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index.

The recent home price and interest rate trends have led to a slowdown in sales and construction year-over-year, Kapfidze said.

“There’s some diminishing demand because of accumulated price increases since about 2012 and because, more recently, the increase in interest rates over — call it — the last year and a half,” he said.

The Federal Reserve’s monetary policy decisions can have some impacts on the housing market as well — namely, indirectly affecting mortgage rates. For example, when the Fed buys and sells mortgage-backed securities and Treasury bills, those transactions influence how mortgage lenders set their mortgage rates.

What today’s market means for sellers

Home sellers have largely reaped the benefits of today’s housing market conditions, especially the increases in home values. Higher prices mean more of a profit when it’s time to sell.

“Appreciation is always beneficial to sellers and detrimental to buyers because it’s making the houses more expensive,” Kapfidze said.

The rise in home prices has impacted housing affordability for many buyers. In fact, the principal and interest portion of the mortgage payment on a median-priced home has jumped more than 16% over the past year, according to real estate data firm CoreLogic.

Will we see a buyer’s market in 2019?

Forecasts have been pointing to more of the same trends in 2019, but at a slower pace. Freddie Mac expects home prices to grow by 4.3% and rates for 30-year fixed-rate mortgages to rise to an average of 5.1%.

The seller’s market is anticipated to continue for while, and some economists have predicted that a buyer’s market won’t return until 2020. As to seeing the price drops that are typically associated with a buyer’s market, Kapfidze doesn’t believe we’re headed in that direction yet.

“I think we’re still going to have price appreciation,” he said. “It’s going to be modest, but prices are still going to be going up, which means things are going to be getting more expensive for buyers.”

If the conversation is about who has more negotiating power, that could possibly be a better indicator of a buyer’s versus seller’s market.

“I suppose if there’s a lot of supply and you have a choice, then maybe that’s more of a buyer’s market,” Kapfidze added, “and if there’s not a lot of supply and houses are getting multiple bids, maybe that’s a seller’s market.”

The bottom line

Next year isn’t different from any other year for homebuyers, Kapfidze said.

Consumers who are considering a home purchase in 2019 should focus less on the type of market we’re in and more on making a lifestyle decision about whether they’re ready for homeownership, he added.

“Once you make a lifestyle decision, then figure out your budget,” Kapfidze said.

Then it’s time to shop around for a mortgage. It’s also helpful to pay attention to mortgage rate trends and the general state of the economy.

“There’s some risk involved in purchasing a house, so you want to make sure that when you buy this asset … that you are in a position to manage your financial obligation, which is the mortgage payment,” Kapfidze continued, “and not be in a position where you create a threat to your financial well-being by overextending yourself when you purchase the house.”

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Crissinda Ponder


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