Now Is The Worst Time to Take Out a Mortgage, Fannie Mae Poll Finds

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Logan Mohtashami on how the housing market is holding up In this HW+ Q&A, HousingWire Lead Analyst Logan Mohtashami breaks down the latest purchase application data.


Young People Hit The Hardest

Younger people have been especially hard hit by the lack of affordable homes.

An analysis from Zillow Group Inc. found that home prices are rising the fastest in suburbs, and that’s an increase likely to continue as a record number of millennials approach what’s traditionally been home buying age for Americans.

Fannie Mae also found that young people expect mortgage rates to continue to rise, with the Federal Reserve attempting to correct what it has said is an economy headed in the wrong direction.

The Fannie Mae survey polled approximately 1,000 people via live telephone interviews between Jan. 1 and Jan. 24.

Respondents polled reported that they were worried about losing their job over the next 12 months, a number that rose to a 10-month high for the regular survey.

Even though the labor market added a record-setting number of new jobs in January, fears about inflation and general market instability are eating away at people’s confidence.

In general, pessimism is on the rise for people who once dreamed of buying a home once they hit their 30s. They also think rental prices will rise to record levels this year as well, as it seems they can’t catch any kind of a break.

Will 2021 Be Better or Worse? Get Your Crystal Ball

Based on this year’s housing market where inventory is low, prices have continued to rise, and bidding wars are making it super-difficult to get a home, will 2021 be better or worse to buy a home? I am asked this question quite a bit and my standard answer is the following, “If I knew if 2021 was going to be better or worse to buy a home, I would be on my book tour.”

This answer gets a giggle, but I believe it states the obvious. As real estate agents, we don’t have a crystal ball or tea leaves to predict the future. Most of us, as real estate agents, are guesstimating the outcome of the future market based on past market history.

That said, HousingWire anticipates the interest rates to stay low, ranging from 2.8% to 3.1%. With low rates, there is more buying power whereby the buyer can purchase a home at a higher price and still stay within budget. There is also anticipation of more homes being available on the market.

There are possibly two sources where the additional inventory can come from. New home construction is anticipated to continue producing more homes to choose from. Also, within the State of California, investors are hopeful that the moratorium on rental properties will be lifted, allowing landlords to give notice to their tenants and sell their rentals.

Home Sale Data by Month

MonthExisting U.S. Home Sales Seasonally Adjusted Annual Rate (in Millions)Median Sales Price at ClosingMedian Days on the MarketSeptember 20195.41$271,50041October 20195.41$271,50044November 20195.32$271,30045December 20195.53$274,50050January 20205.42$266,20056February 20205.76$270,40055March 20205.27$280,70044April 20204.33$286,70035May 20203.91$283,60038June 20204.70$294,50039July 20205.86$305,50035August 20205.98$310,40031September 20206.54$311,80029

Worst Time To Purchase 

End-of-Year/November and December

Avoid shopping for or purchasing a home during the November and December months. While potential buyers may have expectations that others are too busy with holiday festivities, LaGree said the reality is there are lots of investors that need to purchase property by year’s end to fulfill tax requirements. 

“If you are house hunting during this time, be prepared to see houses get scooped up quickly and paid for with cash,” said LaGree.

It’s also stressful to rush into buying a home at the end of the year.

“During this time, many homebuyers are in a rush to close on a home by the end of the year, so they can christen their new homes with family celebrations and holiday festivities,” said de Jong. “Shopping during this time might be more stressful because of holiday and end-of-year timelines.”

Learn More

So why could this be the worst time to invest for some people?

Please let me explain with an example…

Between 2016 and 2018, Sydney and Melbourne property values soared allowing those who owned properties in our two big capital cities to amass small fortunes along the way.

But it’s important to know that just because “Sydney boomed”, that doesn’t mean that ALL of Sydney’s housing boomed.

It means that overall, the majority of properties across the city experienced an increase in value.

However, there are always some areas, pockets, streets, and individual houses that perform better or worse than the average.

For example, the value of the apartments in many of the high-rise, Legoland towers around Sydney languished as concerns about structural integrity, following the Opal Towers debacle tarred all new apartments with the same brush.

Of course, the concerns raised by Covid19 only added to this.

Let me give you a different example.

Let’s say a couple owned a property in a sought-after Sydney suburb in 2017.

They had purchased in 12 months earlier for $1.55m.

It’s right in the middle of a booming property market and sadly, the couple split up.

It’s a messy and contentious divorce, and both parties want to sell the home as quickly as possible so they can move on.

They also don’t want any looky-loo neighbours snooping through their home every weekend, and they don’t have the energy or appetite for a big, public marketing campaign.

So, they engage real estate to sell the home privately/off-market.

It reaches fewer potential buyers and drives less competition, but they secure a buyer within a week.

They sell the property for $1.6m in a hasty settlement and move on.

Had they taken the property to the open market – say, an auction – and a number of would-be buyers fell in love with the property, they could have sold for more money.

But their circumstances dictated a swift sale, so they accepted the price they got and moved on.

It could be the case that one street over, a couple owns very similar property.

They are planning to move in with their parents for six months while they build their next property, so they have no deadline or timeline pressures and they’re happy to wait for the right buyer to come along.

They list their home for auction, pay for an expensive but very high-profile marketing campaign, and achieve a final sale price of $1.825m.

Two similar homes, two very different outcomes.

Neither is “right” or “wrong”, and this is the infuriating truth of real estate: there are no “definites.”

Just a series of educated guesses and informed choices, which – with the right expert guidance – can lead you towards making profitable decisions for your future.

When it comes to deciding the right time to buy or sell, at the end of the day, it’s our own personal situation as much as external factors that influence the best course of action we should take.

The fact is, any time could be the worst time for you personally to buy a property… or it could be the best time to buy.

It truly depends on your own goals, budget, timeline, risk profile, and circumstances as to whether 2021 is a good time to buy.

If you’ve just lost your job or your income is insecure in the current economic climate, then yes, this could be a risky time to commit to a mortgage; in fact, you’d struggle to get a loan.

However, if you’re financially stable and have a deposit ready to go, then some might argue that with 2% mortgage rates and prospects of strong house price growth, 2021 could be the property buying opportunity of a lifetime.

More tips for sellers

Here are some more suggestions for sellers hoping to maximize their selling success:

  • Because real estate is local, speak with an experienced real estate agent in your market who understands sales trends. Real estate agents can give you neighborhood-specific sales information so you can make a strategic decision about when to sell.
  • Keep prep time in mind. Sellers should consider making key repairs and updates to their homes to maximize their return, but this can be a lengthy process. Even simple decluttering can be time-consuming, so plan accordingly and finish these projects before listing your home on the market.
  • When figuring out the best time to sell a house in your market, don’t forget that a difference of a few months can translate into thousands of dollars in either profit or loss. Work closely with your real estate agent so you can time it right and meet your goals.

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