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: Inman: Mortgage rate surpasses 7% in new 2023 high as demand falls again
The Highlights: This article reviews the big news for the week—mortgage interest rates continue to climb and are now at a 22 year high, ending the week well above 7%. A staggering number, especially considering were just above 3% 20 months ago.
- Demand for purchase mortgages was down a seasonally adjusted 0.2% last week compared to the week before, and 26% from a year ago.
- Applications to refinance were also down 2% week over week and 35% from a year ago.
Continued high inflation is the driver for the steady increase in rates. The latest consumer price index data showed the annual inflation rate rose to 3.2% in July, up from 3% in June but an improvement from 8.5% a year ago.
On Friday of last week, the core producer price index for July registered its largest month-to-month increase since November 2022, which also helped send yields on 10-year Treasury notes — a barometer for mortgage rates — to new highs for the year.
What can be gleaned? Home affordability remains a challenge as homebuyers are now contending with the highest interest rates in over 2 decades, AND low inventory.
My Take: There’s no beating around the bush on this one—market conditions are tough right now—particularly for first-time home buyers who can’t rely on equity for help with a down payment on a new home, and for trade up buyers who are increasing the cost of their home AND (likely) their rate. Not to mention that inventory has been historically low for several years now.
The question that lingers: What’s it going to take for the market to normalize?
According to a Realtor.com report, more than 80% of home shoppers looking to buy and sell feel locked into their current rates. What’s more, a recent study conducted by The Harris Poll on behalf of Intuit Credit Karma, found that a whopping 67% of homeowners who plan to sell in the next three years say they are willing to delay their plans until after mortgage rates go down.
Just 2 years ago, the average sales price of a home was $357,000 with 20% down and a 30-year mortgage rate was around 3%, which meant monthly payments of $1200. Now? The average median price of a home is $414,000 and the average 30-year mortgage rate has more than doubled, adding $700 to the monthly payment.
Until rates fall, affordability will be a struggle, and unfortunately, I think it could take awhile for that to happen. But! I do think the worst of it is over—pending some unforeseen issue.
Additionally, if you have to move (or just really want to!), there are creative options to help bring the interest rate down. Watch these short videos here and here and reach out if you have questions!
The Article: Keeping Current Matters: Four Ways You Can Use Your Home Equity
The Highlights: One of the biggest perks of homeownership is the ability to earn and tap into your earned equity. If you’ve owned a home for the last couple years, it’s likely that you’ve gained some significant equity!
CoreLogic analysis shows U.S. homeowners with mortgages (roughly 63% of all properties) have seen their equity increase by a total of $1 trillion since the fourth quarter of 2021, a gain of 7.3% year over year.
Many homeowners know that you can used earned equity when you sell to purchase a new home, but there are ways to tap into this even if you’re not making a move any time soon:
- Reinvest in Your Current Home: Renovations are a great option if you want to change your living space, but you aren’t yet ready to make a move. But it’s important to consider the long-term benefits certain upgrades can bring to your home’s value. Prioritize projects that will get the greatest return on your investment.
- Pursue Personal Ambitions: Home equity can serve as a catalyst for achieving long-term goals. Investing in a new business venture, retirement, or funding an education.
- Avoid Foreclosure: Understanding your options and how your equity can help is crucial if you find yourself in danger of foreclosure. Equity can act as a financial cushion that can be used in times of unexpected challenges or unforeseen circumstances that may disrupt your ability to make mortgage payments on time.
My Take: This article is a helpful reminder to homeowners who may find themselves in need of cash. In addition to the pride, freedom, and tax benefits that come with owning your home, earned equity is near the top of the perks-list! It’s a valuable resource, and if you borrow against it, you can technically use the money however you want.
It’s an awesome benefit, but it comes with a lot of responsibility. Making smart decisions with the money is imperative. Use it for larger expenses like home renovations that improve your home, higher education, or debt consolidation.
One caution—just like anything, there are pros and cons! Home equity loans tend to have higher interest rates than HELOCs, for example. Additionally, as with any loan, failure to make on time payments will negatively affect your credit score.
The Article: NAR: Hot Home Trend: Barbiecore
The Highlights: Anything that invokes feelings of nostalgia brings comfort, so it’s no wonder that Barbie, an iconic childhood toy, is trending in home décor! The Barbie generation has grown up, and now they have real-life dream homes to decorate.
The “Barbiecore” movement is colorful and playful, and can be incorporated into your home, no matter where you live. Here’s what they suggest:
1. Blush pinks: It’s more mature than bubblegum pink, and is easy to incorporate through pops like throw pillows, hand towels, and tabletop accessories.
2. Frills: Furry pillows, tasseled lampshades, scalloped curtains add playful texture.
3. Florals: Small floral prints on linens as well as wallpaper add to a playful aesthetic.
4. Vintage wall decor: One way to channel this is through postcard vacation prints used for the artwork in a home.
5. Curved furnishings: Furniture with movement creates flow and a playful
6. Cloud-like bedding and sofas: Double up the bedding, add sheepskin in white and pastel colors, and create a cozy bed.
My Take: This article was released last year when Matel celebrated 60 years of the Barbie Dreamhouse, but with the release of the Barbie Movie this summer, it’s just as timely. Barbiecore is still trending, and with themed restaurants and loads of inspired merchandise in stores, the trend is easier to incorporate than ever.
From a real estate perspective, what’s the impact of this trend?
First and foremost—your home is YOURS. It’s one of the benefits of owning versus renting! Your home should reflect what you like. You shouldn’t hold back for anyone else’s sake! However, it’s always wise to consider resale when tackling major projects with big price tags!
Listing homes with a very distinct style can narrow the pool of buyers. If you’re going to decide on carpet, tile, or cabinetry (things that stick around for longer) during a renovation, choose something neutral and add in specific colors (like pink!) in less-permanent finishes like paint since it’s so much easier to change out.