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Diving Deep into Buyers Biggest Concerns

Aug 5th, 2021 | jfinney@talktotucker.com

Last week Fannie Mae released survey data regarding market sentiment:

  • Survey showed 77% of the respondents feel that it is a “good time to sell”
  • But the survey also confirmed what we have been feeling – an increasing number of buyers feel it is a “bad time to buy” a home at 64%…this is up from 56% last month and 38% from last July.

Here is the explanation as to why the buyers feel this way: 

“Consumers also continued to cite high home prices as the predominant reason for their ongoing and significant divergence in sentiment toward homebuying and home-selling conditions. While all surveyed segments have expressed greater negativity toward homebuying over the last few months, renters who say they are planning to buy a home in the next few years have demonstrated an even steeper decline in homebuying sentiment than homeowners. It’s likely that affordability concerns are more greatly affecting those who aspire to be first-time homeowners than other consumer segments.”

Let’s take a look at the market conditions that impact the affordability of a home: 

  1. Mortgage rates have increased from 2.65% this past January to 2.9% currently. 
  2. Home prices have increased 15.4% over the last 12 months. 

Based on these 2 factors, a home may be less affordable than before however that does not mean it is not affordable. It is true that your average monthly mortgage payment is higher than they were last year however if we take a look back 30 years, if we adjust for inflation, today’s mortgage payments are 10.7% lower than they were in 1990.

What does that mean for you? 

While you may not get as good of a deal as someone that bought their home last year, it doesn’t mean that you shouldn’t buy a home. Look at the alternatives:

  1. Continue to rent: rent has gone up 9.2% so far in 2021…in previous years, it was more like 2-3% for that same time frame of January through June. 
  2. I’ll wait it out – the Mortgage Bankers Association (MBA) projects mortgage rates to be 4.2% at the end of 2022.A recent survey of over 100 economists, investment strategists, and housing market analysts feel like home prices will increase by 5.12% in 2022. 

By waiting until next year, you’d potentially pay more for the home, need a larger down payment, pay a higher mortgage rate, and pay an additional $3,696 each year over the life of the mortgage.

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