Buyers submit offers at slower pace in July
Sellers have been riding the high of rising home prices and fierce competition.
Homebuyers are retreating.
Pending home sales fell 0.8 percent to a reading of 109.1 in July from a downwardly revised level of 110.0 in June, according to the National Association of Realtors’ (NAR) Pending Home Sales Index.
The index, which measures contract signings to provide future predictions on the direction of housing activity, dropped for the fourth time in five months, and is now down 1.3 percent year over year.
While the West saw minimal gains in pending sales, homebuyers in the rest of the country have limited options and face stiff competition, says Lawrence Yun, NAR’s chief economist.
“The housing market remains stuck in a holding pattern with little signs of breaking through,” Yun said. “The pace of new listings is not catching up with what’s being sold at an astonishingly fast pace.”
Homebuyer income not keeping pace with home prices
Since the housing market began its recovery five years ago, the national median sales price for existing homes has soared 38 percent, Yun says.
While that’s great for sellers looking to make good on their investment, homebuyers aren’t so lucky because their wages aren’t keeping up. In fact, hourly earnings have risen by just 12 percent in the same timeframe, Yun points out.
Many potential homebuyers are priced out of the market because homes are simply unaffordable.
But the slowdown in sales isn’t because Americans don’t want to buy; it’s because there are not enough affordable homes to go around.
“Buyer traffic continues to be higher than a year ago, the typical listing has gone under contract within a month since April, and inventory at the end of July was 9 percent lower than last July,” Yun says.
And until more homeowners and real estate investors decide to sell, or new construction (which has also slowed) ramps up, sales across the country will continue to struggle.
Good time to relocate from expensive markets to more affordable cities
If you’re looking to leave cities like San Francisco, New York City or Seattle, for example, now is a good time to relocate to a region where your housing dollar will go further.
Home prices in Austin, Denver, Fort Lauderdale and Atlanta have been on the upswing, too, but real estate in these desirable (and economically booming) cities isn’t nearly as pricey as their larger metro counterparts.
Another arrow in your home-buying quiver: low mortgage rates. If you earn a good income and have strong credit, many lenders are offering competitive loan products even if you don’t have the traditional 20 percent down payment.
While these less expensive markets have their own supply crunches at the lower price ranges, mid-tier homes are a deal, relatively, to the amount of home you could get for similar prices on either coast.
Winners in current market: Homeowners looking to refinance
If you haven’t refinanced yet, current mortgage rates — now hovering below 4 percent — are in your favor. Plus, with home values rising in many markets, you probably have more equity in your home than you think.
You have a few options for refinancing. For starters, you can simply nab a lower rate, which saves you money on your monthly mortgage payments.
Another possibility: refinance to a shorter-term loan to pay off your home faster. Going this route will earn you an even lower mortgage rate, but your payment will be higher.
A word of caution, though: Make sure you’re not tying up all your monthly income in your home if you have high-interest debts or other financial goals to meet first.
Also, if you’ve wanted to do some renovations but don’t quite have enough cash saved up, a cash-out refinance could be a good option. This refinancing allows you to pull a portion of your home’s equity in a lump-sum payment.
A cash-out refinance will increase the amount you owe to the bank since you’re borrowing additional money beyond your original loan balance. But if your home’s value has risen and you have a decent amount of equity, a cash-out refinance could be the answer to your
Whatever your refinance goals are, a lender can calculate the numbers to see how long it’ll take you to recoup your refinancing costs and how your new monthly payment will impact your overall financial picture.
Check Your Home Buying Eligibility
Mortgage rates are low. The market is competitive but homes can still be found. Now is the perfect time to check your buying eligibility and get fully pre-approved.
Those that delay could miss out on the ideal home.