Experts: First-time homebuyers must be patient with the COVID-Era . housing market
New home sales fell in April for the fourth consecutive month, approaching levels of the COVID-19 pandemic.
First-time home buyers may benefit, according to housing experts. The process requires a little patience.
It’s entirely possible that rates will be at a flat level and not change much over the next few years,” said Greg McBride, chief financial analyst at Bankrate.com.
“This would benefit first-time buyers by allowing their income to ‘catch up’ to the cost of home ownership somewhat, but this will unfold over a period of two to four years, not in the next two to four months.”
The United States incurred a two-year rise in home prices during the COVID-19 pandemic.
Around that time, home prices were affected by higher interest rates, a shortage of quality home inventory, inflation affecting the cost of materials, and a “volatile stock market” as the Dow swung between 13,000 and 34,000 points in less than 24 months.
Rod Smith, chairman of River Front Investment Group, a global asset management company, believes home prices are generally nearing a peak.
“However, given the strong supply/demand conditions, we believe that most markets are more likely to rust than collapse,” Smith says. “By rust, we mean those nominal prices [not adjusted for inflation] It could fall somewhat or fall back around current levels for several years.”
According to a YouGov.com survey of 1,000 adults, only 6% of homeowners said that the value of their homes declined in the past year.
Meanwhile, this means affordability may be a challenge for first-time buyers, says CBS MarketWatch.
The median home sale price was $428,700 in the first quarter of 2022, up 30% from $329,000 in the first quarter of 2020.
Mortgage rates also jumped from 2.75% last fall to a 30-year fixed rate of 5.25%.
Redfin estimates that 8.2% of homes are currently valued at $1 million or more, which equates to 6 million properties.
This is significantly higher than the 2020 number of 3.5 million homes with $1 million values, or 4.8% of the nation’s housing stock.
“Sellers are putting homes on the market and are asking for reduced prices,” McBride said. “In a neighborhood where homes sold for $600,000 one year ago, the seller might now ask for $800,000. Sure, they might need to lower the price a bit and eventually sell for $725,000, but that’s still well above $600,000. It was going to be sold one year ago.”
As Greg Handler, head of mortgage and consumer credit at Western Asset Management, told MarketWatch: “Can you really see correction or overcorrection? I think there’s clearly some risks from that.”
says Bob Griffiths, general manager of home services at Houwzer Mortgage, a Philadelphia-based real estate and mortgage brokerage firm.
“In the past week, we’ve seen indications that home prices may be stabilizing, as the inventory of homes for sale has increased and the percentage of homes purchased below list prices has increased. These developments, if they continue, will help new buyers looking to enter the housing market.”
More positive data: More than half (58%) of Americans owned a home, and nearly 30% reported fully owning homes, a YouGov survey also found.
The US Census Bureau’s five-year estimates, published in 2020, found a slightly higher share of owner-occupied units — 38% — who owned their homes entirely.
What does all this mean for the under-40 crowd of potential home buyers?
According to the Freddie Mac Report on Millennial Home Ownership from last year, “rising home prices and a record low inventory of affordable housing for sale have also hampered home ownership.”
“On the other hand, as more millennials reach the age of 40, their family formation rate will accelerate due to higher marriage rates and more stable incomes.”
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