Lynn North's Market Update

Article from Keeping Current Matters July 12, 2022

The housing market is at a turning point, and if you’re thinking of buying or selling a home, that may leave you wondering: is it still a good time to buy a home? Should I make a move this year? To help answer those questions, let’s turn to the experts for projections on what the second half of the year holds for residential real estate.

Where Mortgage Rates Will Go Depends on Inflation

While one of the big questions on all buyers’ minds is where will mortgage rates go in the months ahead, no one has a crystal ball to know exactly what’ll happen in the future. What housing market experts know for sure is that the record-low mortgage rates during the pandemic were an outlier, not the norm.

This year, rates have climbed over 2% due to the Federal Reserve’s response to rising inflation. If inflation continues to rise, it’s likely that mortgage rates will respond. Greg McBride, Chief Financial Analyst at Bankrateexplains it well:

“Until inflation peaks, mortgage rates won’t either. Without improvement on the inflation front, we don’t know where the interest rate ceiling will be.”

Whether you’re buying your first home or selling your current house to make a move, today’s mortgage rate is an important factor to consider. When rates rise, they impact affordability and your purchasing power. That’s why it’s crucial to work with a team of professionals, so you have expert advice to help you make an informed decision about your best move.

The Supply of Homes for Sale Projected To Continue Increasing

This year, particularly this spring, the number of homes for sale has grown. That’s partly due to more homeowners listing their houses, but also because higher mortgage rates have helped ease the intensity of buyer demand. Moderating buyer demand slows down the pace of home sales, which in turn helps inventory rise.

Experts say that growth will continue. Recently, updated their 2022 inventory forecast. In the latest release, they increased their projections for inventory gains dramatically, going from a 0.3% increase at the beginning of the year to a 15.0% jump by the end of 2022 (see graph below):


More homes to choose from is great news if you’re craving more options for your home search – just know that there isn’t a sudden surplus of inventory on the horizon. Housing supply is still low, so you’ll need to partner with an agent to stay on top of what’s available in your market and move fast when you find the one. It’s not going to be easy to find a home, but it certainly won’t be as difficult as it has been over the past two years.

Home Price Forecasts Call for Ongoing Appreciation

Due to the imbalance between the number of homes for sale and the number of buyers looking to make a purchase, the pandemic led to record-breaking increases in home prices. According to CoreLogic, homes appreciated by 15% in 2021, and they’ve continued to rise this year.

Even though housing supply is increasing today, there are still more buyers than there are homes for sale, and that’s maintaining the upward pressure on home prices. That’s why experts are not calling for prices to decline, rather they’re forecasting they’ll continue to climb, just at a more moderate pace this year. On average, homes are projected to appreciate by about 8.5% in 2022 (see graph below):


Selma Hepp, Deputy Chief Economist at CoreLogic, explains why the housing market will see deceleration, but not depreciation, in prices:

“The current home price growth rate is unsustainable, and higher mortgage rates coupled with more inventory will lead to slower home price growth but unlikely declines in home prices.

For current homeowners looking to sell, know your home’s value isn’t projected to fall, but waiting to make your purchase does mean your next home could cost more as home prices continue to appreciate. That’s why, if you’re thinking about buying your first home or you’re ready to make a move, it may make sense to do so now before prices climb higher. But rest assured, once you buy a home, that price appreciation will help grow the value of your investment.

Bottom Line

Whether you’re a homebuyer or seller, you need to know what’s happening in the housing market, so you can make the most informed decision possible. Connect with a real estate advisor to discuss your goals and what lies ahead, so you can determine the best plan for your move.

Please do not hesitate to contact me for all of your real estate needs! I truly am personally committed to your success!
Lynn North
[email protected]

Take a look at the Santa Clara Market Report below.

Buying Down the Rate for Homebuyers

We know this is a challenging real estate market for buyers and sellers. However, one tool that's often overlooked can help your buyers qualify for more and negotiate a better deal: paying points.

What are points?

Mortgage points, also called basis points, are the amount of interest a borrower will pay on their mortgage. Borrowers can pay an upfront fee, also known as “paying points” or “buying down the rate,” in exchange for a reduced interest rate.
While this strategy isn’t too common in low-rate environments, it’s becoming once again more popular as the Federal Reserve increases interest rates. Buying down the rate is a strategy that can benefit both buyers and sellers.

Points strategy for buyers

Paying points is a simple strategy for buyers. The borrower pays an upfront fee to the lender in exchange for a lower interest rate. This tactic is common in rising-rate environments such as the one we’re in now.
Each point reduces the interest rate by 0.25% and costs 1% of the mortgage amount. For example, buying down a 5% rate on a $300,000 mortgage would cost $3,000 and reduce the rate to 4.75%. A lower interest rate means a lower monthly payment, which increases the buyer’s purchasing power. Determining how long your buyers plan to stay in their home and calculating the break-even point when paying points is essential to ensure it makes financial sense.

Points strategy for sellers

Buyers have known about buying points for years, yet it’s not typically something that impacts sellers. However, in today’s real estate market, it could benefit sellers to consider a points strategy for potential buyers.
Instead of accepting a significant price reduction, your sellers could buy down the buyer’s mortgage rate, effectively reducing the buyer’s monthly payment and helping them qualify for the higher selling price. Paying points is typically more cost-effective than reducing the purchase price. For example, buying down the rate on a $300,000 mortgage ($3,000) holds roughly the same cost savings for the buyer as a $10,000 price reduction.
This can be an effective strategy for homes on the market a little longer than expected or helping buyers with home affordability to achieve the home seller's desired place.

Work With Lynn

She is personally committed to her clients’ success and her impressive results are in selling her listings within 10 days with multiple offers! Contact Lynn for a free consultation on your home.