Talking Real Estate with Hope Leitner, January 2023

 2023 is already making headlines for the Real Estate Market. Don't let the bad news scare you. There really is no crash in sight according to the professionals. San Diego is even less likely to experience a steep downturn. There's just too much demand for what comes on the market here. The gains in 2020, 2021 & 2022 were so extreme, any decline at all just indicates a stabilizing market.
 
Rising interest rates may mean that some buyers will look into risky loans, this article below will arm you with the knowledge necessary to avoid a mortgage pitfall. 
 
I love hearing from everyone on this email list. I am here to support you whatever your real estate needs might be.  
 
January - Ponder this - “We are born in ignorance, we die in ignorance, but maybe sometimes we learn something important and pass it along to others before we die. Or we write it down in a little book.” - Greg Bear - Reading is what helps us overcome our ignorance, our fears, our self-made walls. January is a great time to start reading a new book. 
 
As always, I am here for you, your family, and friends.
 
Hope Leitner, CRS,
CalDRE #01874321
Hope Opens Doors
 

TRENDS, HOMEBUYERS, HOME SELLERS, HOMEOWNERS, MORTGAGE INTEREST RATES, FINANCE

 

Housing Outlook 2023

 

What will the new year bring for homebuyers, homeowners and home sellers? Lower or higher home prices? Higher or lower mortgage interest rates? Or a continuation of the overheated pandemic-inspired housing market?

 

There’s no question that the blistering housing market of the past three years was hard on homebuyers. By October 2022, the average mortgage interest rate for a 30-year fixed is 7.24%, more than double the 3.22% level in January 2022.

 

According to Fannie Mae, the combination of high inflation, monetary policy tightening, and a slowing housing market is “likely to tip the economy into a modest recession in the first quarter of 2023.”

 

Many economic forecasters believe housing prices will decline, but that homebuyers shouldn’t fear buying during a declining market. Morgan Stanley predicts a 7% dip in home prices for 2023 that would return housing prices to where they were in January 2022 – 32% higher than prices were in March 2020 when the pandemic began. Economists with Goldman Sachs and Moody Analytics are predicting 5% to 10% declines in home prices, based on lack of homebuyer affordability, slowing housing sales, fewer mortgage applications and a looming recession, however mild.

 

BusinessInsider.com reports that the Federal Reserve’s overnight rate hikes have raised mortgage interest rates, pushing affordability to new lows, but that a recession could bring interest rates down again. That combined with softer homebuying demand due to inflation and sellers lowering their prices would make spring and summer 2023 great times to buy a home.

 

 

TRENDS, HOMEBUYERS, HOME SELLERS, HOMEOWNERS, MORTGAGE INTEREST RATES, FINANCE

 

Risky Loans Tempt Homebuyers

 

As mortgage interest rates rise, homebuyers like you may be wishing for easier, cheaper loans to obtain, but any loan that isn’t conventional or government-guaranteed could put you at greater financial risk. Remember the Great Recession of 2008? It was the first and only time that unsustainable mortgage loans resulted in a nationwide housing crisis.

 

National Association of REALTORS chief economist Lawrence Yun says that rising yields in U.S. Treasuries explain why mortgage interest rates are exceeding 7% for a 30-year fixed-rate mortgage.

 

In response, borrowers are returning to adjustable-rate and hybrid loans, interest-only loans, and 2-1 buydowns. The danger for borrowers is much higher mortgage interest rates and bigger mortgage payments when the loans reset. However, borrowers can save money if they choose the right loan product and correctly estimate how long they’ll occupy their homes and refinance or sell their homes - before rate adjustments get too high. 

Fixed-rate mortgages (FRMs) have the same interest rate for the life of the loan.

 

Adjustable-rate mortgages (ARMs) adjust periodically with caps on how often the rate can change and how much higher the rate can go beyond the initial FRM rate. A hybrid loan has an initial fixed rate for a term of one, five, seven or ten years, then converts to an adjustable rate at the end of the term. Typically, homeowners stay for about 10 years before selling, so a 10-year term allows them to enjoy the benefits of a FRM at a much lower cost.