RealNews RoundUp
Each week I round-up the best real estate articles and break them down for you in an easy to digest format. Here are the articles I’ve found most interesting over the last couple weeks:
The Article: Norada Real Estate: Is it a Good Time to Buy a House or Should I Wait Until 2024
The Highlights: To tamp down inflation, the Federal Reserve has continued raising interest rates. We had a brief reprieve earlier this month when rates dipped just under 5%, but after the most recent CPI numbers missed expectations, interest rates rose again and remain in the mid-6% range. This is more than double what rates were 14 months ago.
On a $300,000 loan, a 30-year, fixed-rate mortgage at In December 2021's rate of 3.11% would have meant a monthly payment of about $1,282 (Principal & interest). At today’s rate the monthly payment soars to $1,882 (principal & interest). That’s an extra $600 a month for the same loan.
This begs the question, with rates so high, is it a good time to buy a house? Norada says the best time to buy is when you can afford it (an unsatisfying but true answer) but goes on to say that if you don't have a specific date in mind for when you want to buy a new property, you may be better off waiting till rates fall a bit—whenever that occurs.
My Take: I ultimately agree with Norada here! It’s almost impossible to predict where rates will go throughout the rest of 2023, but you need to afford your mortgage payment on day one of the loan, so the best time to buy is when you can afford it! The good news is that if you can afford the mortgage payment at a higher interest rate, you could requalify for a refinance down the road lowering your payment.
If you plan on holding real estate for the long haul (generally between 2-5 years at minimum), there’s really no downside to purchasing when rates are high (as long as you can afford it). Especially if you’re a first time homebuyer! Real estate appreciates differently regionally, but in the Chicagoland area, the cumulative appreciation rate over the ten years has been 68.79%. Real estate is a long game!
Curious about the best time to buy seasonally? Check out this video.
The Article: CNBC: In this volatile market, here’s how to know when the bottom is in
The Highlights: After a major market cool-down last fall, signs are now showing that price cuts and rate drops homebuyers wanted aren’t materializing.
Goldman Sachs trimmed its estimate of high-to-low declines in nationwide home prices to 6% from their 10% prediction just a few weeks ago. Additionally, Zillow now predicts prices to rise slightly in 2023.
Existing home sales, which were running at a 6.5 million annual pace in early 2021, have begun to stabilize around 4 million, with the National Association of Realtors forecasting 4.8 million for the year.
Meanwhile, mortgage rates, which dipped under a 6% on Feb. 2 after more than doubling since mid-2021 to almost 7.4%, have jumped back to 6.75%, driven by a negative January jobs report.
Even despite some (seemingly) volatile activity over the past couple years, there is no sign that the the housing bubble we saw in 2008/2009 will repeat this time around. Affordability is bad now, after rate hikes and Covid-driven price increases, but it has been worse
My Take: This article perfectly summarizes what’s happening in the market right now, and I agree think these data points do accurately predict that the market bottom was in December 2022.
Prices are on their way back up, and all it took for buyers to become more motivated was rates dropping into the 6% range from where they were last fall in the mid-7s. Anecdotally, our team had several listings that didn’t sell late last year, and when they went back on the market in early 2023, they sold almost immediately with multiple offers.
This is likely because inventory remains historically low. 85% of homeowners have an interest rate less than 5%. Even if homeowners want to move, high rates are enough to squelch their motivation since it would mean trading up significantly in rate. If rates do lower and we get a flood of inventory, this would obviously impact demand, and we’d have to see what that does to pricing.
The market is nothing like what we saw in 2008, so there is no reason to expect a bust, but the current conundrum does reveal the problem with raising interest rates so quickly. There’s a standoff between buyers and sellers.
Overall, I think transactions will be down this year, but I expect home prices to go up at a more modest pace throughout 2023.
The Article: Forbes: The Pantone 2023 Color of the Year Makes a U-Turn
The Highlights: Paint companies have been declaring a “Color of the Year” for decades now. (Check out Benjamin Moore’s and Sherwin William’s Colors of the Year!). They try to predict color trends, but they’re mostly just a marketing stunt.
However! Pantone was the originator of this idea in the late 1990s, and does so without selling any accompanying products, so maybe they’re on to something…
This year, they’ve chosen a bold and unconventional color: PANTONE 18-1750 Viva Magenta. Leatrice Eiseman, executive director of the Pantone Color Institute says this about their new Color-of-the-Year:
“This is an unconventional shade for an unconventional time. Viva Magenta descends from the red family, and is inspired by the red of cochineal, one of the most precious dyes belonging to the natural dye family, as well as one of the strongest and brightest the world has known. Viva Magenta reconnects us to original matter. Invoking the forces of nature, it galvanizes our spirit, helping us to build our inner strength.”
My Take: Neutrals aren’t going anywhere (especially as the prevailing background color in home interiors), but this selection reveals how a dramatic shade can liven up your existing neutral décor, and people may be ready for that!
Your living space is exactly that…yours! There’s no need to swing wildly from trend to trend within your home, but it might be fun to play with these colors in small ways throughout your house.
Interestingly, all three colors-of-the-year have a rosy pink/red undertones which might be something to consider as a starting point if you want to move away from all-neutral décor to a more colorful palette.
What do you think of this color choice by Pantone?