Do you happen to catch last week’s blog post where I introduced the concept of Buyer Fatigue?

Buyer Fatigue is a very real condition being experienced by many potential homebuyers as a result of today’s real estate market, understandably too!

For months now, homebuyers have been dealing with low inventory, multiple offers, bidding wars, and losing out to all-cash offers. Some homebuyers have reached the point of saying enough is enough. We can’t do this anymore. They’re stressed out and beyond frustrated. I get it! I’m getting stressed out and frustrated as well.

Homebuyers either have to persist and keep moving forward, rent, or place their place on hold for a while. In this blog post, I take a closer look at the options of renting or placing your home search on hold to see what each could mean for you so that you can make the decision that’s best for your situation.

Watch the following video, or continue reading below, to learn more.

Recently, Fannie Mae released the Home Purchase Sentiment Index (HPSI). The HPSI is a survey that tracks the sentiments of both buyers and sellers with regard to the housing market. No surprise, 77% of all respondents believe that now is a great time to sell. Makes sense, doesn't it? I mean, home prices have been appreciating at an accelerated pace which is great for sellers, but what's really changed over the past year is the sentiment of buyers.

One of the questions asked was, “Is now a bad time to buy a home?” The percentage of respondents saying yes, now is a bad time to buy a home, hit 64%. That is a substantial increase. Just a month ago, it was at 56%. A year ago, it was 38%.

As the HPSI explains:

Consumers are continuing to cite high home prices as the predominant reason for their ongoing and significant divergence in sentiment towards home buying and home selling conditions While all surveyed segments have expressed greater negativity toward home buying over the last few months, renters who say they are planning to buy a home in the next few years have demonstrated an even steeper decline in home buying sentiment than homeowners. It’s likely that affordability concerns are more greatly affecting those who aspire to be first-time homeowners than other consumer segments

The negative attitudes towards the market have increased and that’s not unexpected. With rapidly rising home prices the biggest concern that buyers have is the belief they're going to be paying too much, but let’s take a closer look at the market conditions that impact home affordability.

A mortgage payment is determined by the price of the home and the mortgage rate of the loan used to purchase it. Lately, monthly mortgage payments have gone up for buyers for two key reasons:

1. Mortgage rates have increased from 2.65% this past January to 2.97% today

2. Home prices have increased by an average of 15.4% over the last 12 months

While rising home prices have meant that homes are less affordable today, it doesn’t mean they aren’t affordable. Although homes in 2021 are less affordable than in 2020 and 2019, they are actually more affordable than they were between 2012 and 2018 thanks to record low-interest rates. To take it a step further, the average mortgage payment today is actually 10.7% less than it was in 1990!

What does this mean for you? While you may not get the homebuying deal someone you know got last year, that doesn’t mean you shouldn’t still buy a home. Here are your alternatives to buying and the trade-offs you’ll have with each.

Alternative 1: I’ll continue to rent instead

Some may consider renting as the better option. However, the monthly cost of renting a home is skyrocketing.

According to the July National Rent Report from Apartment List:

…So far in 2021, rental prices have grown a staggering 9.2%. To put that in context, in previous years growth from January to June is usually just 2 to 3%. After this month’s spike, rents have been pushed well above our expectations of where they would have been had the pandemic not disrupted the market.

Based on these appreciation rates, rent is actually going up faster than home prices. As rents increase you will find that you are spending more of your monthly income on rent, which will make it harder to save money for a down payment and you will not enjoy any of the benefits of increased wealth due to rising home equity.

Alternative 2: I’ll wait it out

Other homebuyers I have spoken to recently have decided to wait a year in the hope purchasing a home will be less expensive then. Let’s take a look at that possibility.

As mentioned above, the monthly mortgage payment is determined by the purchase price of the home and the mortgage rate. A lower monthly mortgage payment a year from now would mean one, or both, of these elements would need to decrease over the next year. The challenge is that housing experts are predicting exactly the opposite.

• The Mortgage Bankers Association (MBA) projects mortgage rates will be at 4.2% by the end of 2022

• The Home Price Expectation Survey (HPES), a survey of over 100 economists, investment strategists, and housing market analysts, calls for home prices to increase by 5.15% in 2022

Based on these projections, here’s the potential impact on a monthly mortgage payment would be:

By waiting a year you could find yourself paying more for the home, needing a larger down payment, have a higher mortgage rate, and therefore a higher monthly payment.

Bottom Line

I share this information not to suggest you should buy now if it's not the right time, but I share this because if you're sitting on the sidelines thinking that prices are going to come down and mortgage rates are going to stay below 3%, I think you might be disappointed as there are no indications either of these things will happen (for additional information check out my Real Estate Market Update for July 2021).

My goal in sharing this information is to make sure you have the facts necessary to make the best decision for you and your situation.

If you have additional questions or a specific situation that you'd like to discuss, please Click Here to schedule a no-cost, no-obligation call with me.