Friday Market Update: Navigating the Housing Market: Rates, Affordability, and Opportunities
Happy Friday! As we navigate the twists and turns of 2023, mortgage rates have reached a new multi-decade high, with the 30-year fixed rate surpassing 8.00%, landing at 8.12%. The news feeds are filled with these figures, leading many potential buyers and sellers to postpone their plans until rates stabilize. While waiting may seem like the safest option, it’s crucial to recognize the unique opportunities that today’s market presents. Addressing the affordability concern is the key to unlocking these opportunities. Over the past few months, I’ve discussed the advantages of permanent and temporary buydowns as a solution to today’s affordability challenges. These options are now more relevant than ever. So, let’s give you a real-life example to see, providing clients with the potential to reduce their interest rates for up to three years from the date of purchase. (See buydown image below) Consider a client interested in purchasing a $750k home with a 20% down payment. The original mortgage rate of 8.125% would result in a monthly principal and interest payment exceeding $4,400. However, by utilizing the temporary buydown, the client was able to reduce their monthly payment by over $1188 in the first year, $809 in the second year, and $412 in the third year, ultimately saving over $28,900 in payments over the first three years. This option not only gave the client the confidence to proceed with the purchase but also benefited the seller, who retained an additional funds in net proceeds, as the client’s initial offer was significantly below the listing price. By addressing affordability head-on, we can provide buyers with the peace of mind that comes with reduced payments over the next three years, giving rates ample time to decrease and positioning them for a future refinance. This strategy also avoids the potential pitfalls of waiting for rates to drop, which could result in higher home prices due to increased demand. Yes, rates are far from ideal, but people still need to buy homes, and others need to sell. Armed with this information, we can offer invaluable support to our clients, ensuring their success in today’s challenging market. As always, we are here to assist you in communicating this message to your clients. Wishing you a fantastic day ahead! Holly