Experts’ home sale inventory forecasts for the spring echo expectations from recent years. And in some regions, it could be a very competitive homebuyer market. Affordability is likely to be a major issue according to CoreLogic’s chief economist Frank Nothaft (Peering into the Housing and Mortgage Outlook with 20/20 Vision; corelogic.com; Dec. 5, 2019). The CoreLogic Home Price Index predicts that 2020 home prices will increase more than they did during 2019. Lower priced homes will likely appreciate at a much higher rate than upper bracket and luxury homes.
Many first-time homebuyers may become discouraged and decide to continue renting. However, renting is expected to be less affordable in 2020. CoreLogic’s Single-Family Rent Index indicates that rents are increasing at double the rate of inflation. So, although renting may seem like the default fallback, it may be the more expensive option. A combination of increasing rent, a continuing good economy, and historically low mortgage rates are expected to be the catalyst for homebuyers to get into the market.
If you are a homebuyer, the 2020 housing market outlook may sound daunting. Although you may be anticipating something akin to the Game of Thrones this spring, take heart because planning and strategy can help your home buying success.
Talk to a mortgage lender. One of the worst feelings is finding out a seller took another offer because your offer didn’t have a financing letter. Not identifying a lender and securing an approval letter before looking at homes is a strategic error, especially if you need to move fast on making an offer. Having awesome credit scores, a good income, and savings in the bank, means nothing to a home seller unless a mortgage professional confirms this with a mortgage approval letter.
Work out a home buying budget. Consult financial professionals, such as your financial planner or CPA to review income, assets and debts to determine a realistic housing budget. In deciding on your housing budget, consider monthly mortgage payments, Homeowners Association (HOA) or condo fees, property tax, insurance, utilities, maintenance, etc. Your loan officer can help determine a home price range based on your monthly housing budget. Although, your home buying budget may be less than the maximum mortgage amount for which you qualify, don’t be tempted to go beyond your budget. Sticking to your budget can help you avoid “buyer’s remorse.”
Although the national housing market is portrayed as very competitive for homebuyers, CoreLogic’s Nothaft suggests that local neighborhood markets can differ widely. As a homebuyer, keep an open mind and consider a wider home search area. Consider all your home buying options, including new construction, and the possibility of doing an FHA 203k renovation.
Choose your realtor carefully, as not all agents are the same. Hookup with an experienced full-time real estate agent. Empirical research studies indicate that a seasoned, veteran agent can make a positive impact on your home purchase. Experienced agents understand the nuances of negotiating and can make your home buying experience more efficient. Full-time agents know the market, which is an asset during your home search. Don’t just rely on the first agent you meet at an open house, or finding an agent on the internet. Talk to several (or more) realtors to determine if they’re a good fit for your goals. Make sure the agent you hire has your best interests in mind when searching homes and negotiating.
Dan Krell is a Realtor® with RE/MAX Platinum Realty in Bethesda, MD. You can access more information at www.DanKrell.com.