Housing Market Changes
Big changes in the housing market last year provided good news to existing homeowners while presenting a challenge to consumers in the housing market.
According to a Washington Post interview with the National Association of Realtors (NAR), home sales set records last year, due in part to the pandemic. From small apartments in the city primarily used to offer respite from the hustle and bustle to condos positioned in multi-family buildings, folks are now seeking single-family homes to accommodate the lifestyle changes brought on by the pandemic. Final data for 2020 is still pending, but the trade association for real estate agents estimates new home sales rose 20 percent over 2019, and NAR predicts new home sales will increase by 21 percent in 2021.
The increase in consumers looking to purchase a home means a decrease in the supply of houses available to sell. At the same time, rates on mortgage loans reached historical lows in 2020. Those two factors combined to cause a rise in the cost of homeownership.
According to an article by The Ascent, the median price of an
existing home in June 2020 was $295,300, or 3.5 percent higher than during the
same time period in 2019. This increase in home value is great news for
existing homeowners, as it has boosted their wealth accumulation. However, this
trend also reveals a decline in housing affordability and could significantly
limit achieving the American dream of homeownership for communities of color
and young adults if the affordable housing supply is not increased.
Preparing to purchase a home
If you are someone preparing to enter the housing market, here are a few suggestions from The Mortgage Reports to help you prepare for this monumental purchase:
1. Check your credit – Buyers should check their credit at least 6 to 12 months before they consider purchasing a house to allow time to mediate a low credit score if necessary. Your credit score determines eligibility for a mortgage and influences your rate.
2. Save
money – Common advice is to pay a 20 percent
down payment for a home to avoid paying mortgage insurance. But even if you
decide to take the mortgage insurance option, a
down payment of 3 to 5 percent will be required. It is important to remember that the buyer is also responsible for closing costs, or roughly 2 to 5 percent of the loan
amount.
3. Determine
your budget – It is
important to understand how much house you can reasonably afford before starting
to look. Before you call EFCU, use an online mortgage calculator to estimate affordability. Once you
know how much you can afford, be sure to also calculate how much you will need
to have on-hand as a down payment.
4. Do
not rush –
Buying a home is a huge decision and one that should not be rushed. If you
move too fast, you could overlook vital steps that could save you money,
including home inspection and comparison shopping. Do not end up with a
fixer-upper when you thought you were buying a turn-key home!
More of a visual person? Click here to see how the
Heartland Credit Union Association in Wichita, KS brought these four home
buying tips to life.
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