Over the past couple of years, a lot of people have had a hard time buying a home. And while affordability is still tight, there are signs it's getting a little better and might keep improving throughout the rest of the year. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:

“Housing affordability is improving ever so modestly, but it is moving in the right direction.”

Here’s a look at the latest data on the three biggest factors affecting home affordability: mortgage rates, home prices, and wages. 

1. Mortgage Rates

Mortgage rates have been volatile this year, bouncing around from the mid-6% to low 7% range. But there's some good news. Data from Freddie Mac shows rates have been trending down overall since May (see graph below):

Mortgage rates have improved lately in part because of recent economic, employment, and inflation data. Moving forward, some rate volatility is to be expected. But if future economic data continues to show signs of cooling, experts say mortgage rates could keep going down.

 Even a small drop can help you out. When rates decline, it's easier to afford the home you want because your monthly payment will be lower. Just don’t expect them to go back down to 3%.

2. Home Prices

The second big thing to think about is home prices Nationally, they’re still going up this year, but not as fast as they did a couple of years ago. The graph below uses home price data from Case-Shiller to illustrate that point:

If you're thinking about buying a home, slower price growth is good news. Home prices went up a lot during the pandemic, making it hard for many people to buy. Now, with prices rising more slowly, buying a home may feel less out of reach. As Odeta Kushi, Deputy Chief Economist at First American, says: 

“While housing affordability is low for potential first-time home buyers, slowing price appreciation and lower mortgage rates could help – so the dream of homeownership isn’t boarded up just yet.”

3. Wages

Another factor helping with affordability is rising wages. The graph below uses data from the Bureau of Labor Statistics (BLS) to show how wages have increased over time:

Look at the blue dotted line. It shows how wages usually go up in a typical year. On the right side of the graph, you'll see wages are rising even faster than normal right now – that's the green line.

This helps you because if your income increases, it's easier to afford a home. That’s because you won't have to spend as much of your paycheck on your monthly mortgage payment.

When you put all these factors together, you see mortgage rates are trending down, home prices are rising more slowly, and wages are going up faster than usual. Though affordability is still a challenge, these trends are early signs things might be starting to improve.

Joe

If you're planning to buy your first home, then you're probably focused on saving for all the costs involved in such a big purchase. One of the expenses that may be at the top of your mind is your down payment. If you’re intimidated by how much you need to save for that, it may be because you believe you must put 20% down. That doesn’t necessarily have to be the case. As the National Association of Realtors (NAR) notes:

“One of the biggest misconceptions among housing consumers is what the typical down payment is and what amount is needed to enter homeownership.”

And a recent Freddie Mac survey finds:

“. . . nearly a third of prospective homebuyers think they need a down payment of 20% or more to buy a home. This myth remains one of the largest perceived barriers to achieving homeownership.”

Here’s the good news. Unless specified by your loan type or lender, it’s typically not required to put 20% down. This means you could be closer to your homebuying dream than you realize.

According to NAR, the median down payment hasn’t been over 20% since 2005. In fact, the median down payment for all homebuyers today is only 14%. And it’s even lower for first-time homebuyers at just 6% (see graph below):

What does this mean for you? It means you may not need to save as much as you originally thought.

Learn About Options That Can Help You Toward Your Goal

And it’s not just how much you need for your down payment that isn’t clear. There are also misconceptions about down payment assistance programs. For starters, many people believe there’s only assistance available for first-time homebuyers. While first-time buyers have many options to explore, repeat buyers have some, too.

According to Down Payment Resource, there are over 2,000 homebuyer assistance programs in the U.S., and the majority are intended to help with down payments. That same resource goes on to say:

“You don’t have to be a first-time buyer. Over 38% of all programs are for repeat homebuyers who have owned a home in the last 3 years.”

Plus, there are even loan types, like FHA loans with down payments as low as 3.5% as well as options like VA loans and USDA loans with no down payment requirements for qualified applicants.

If you’re interested in learning more about down payment assistance programs, information is available through sites like Down Payment Resource. Then, partner with a trusted lender to learn what you qualify for on your homebuying journey.

Bottom Line: A 20% down payment isn’t always required. If you want to purchase a home this year, let’s connect to start the conversation about your homebuying goals.

As mortgage rates rose last year, activity in the housing market slowed down. And as a result, homes started seeing fewer offers and stayed on the market longer. That meant some homeowners decided to press pause on selling.

Now, however, rates are beginning to come down—and buyers are starting to reenter the market. In fact, the latest data from the Mortgage Bankers Association (MBA) shows mortgage applications increased last week by 7% compared to the week before.

So, if you’ve been planning to sell your house but you’re unsure if there will be anyone to buy it, this shift in the market could be your chance. Here’s what experts are saying about buyers returning to the market as we approach spring.

Mike Fratantoni, SVP and Chief Economist, MBA:

“Mortgage rates are now at their lowest level since September 2022, and about a percentage point below the peak mortgage rate last fall. As we enter the beginning of the spring buying season, lower mortgage rates and more homes on the market will help affordability for first-time homebuyers.”

Lawrence Yun, Chief Economist, National Association of Realtors (NAR):

“The upcoming months should see a return of buyers, as mortgage rates appear to have already peaked and have been coming down since mid-November.”

Thomas LaSalvia, Senior Economist, Moody’s Analytics:

"We expect the labor market to remain robust, wages to continue to rise—maybe not at the pace that they did during the pandemic, but that will open up some opportunity for folks to enter homeownership as interest rates stabilize a bit."

Sam Khater, Chief Economist, Freddie Mac:

“Homebuyers are waiting for rates to decrease more significantly, and when they do, a strong job market and a large demographic tailwind of Millennial renters will provide support to the purchase market.”

Bottom Line

If you’ve been thinking about making a move, now’s the time to get your house ready to sell. Let’s connect so you can learn about buyer demand in our area the best time to put your house on the market.

While it’s exciting to start thinking about moving in and decorating after you’ve applied for your mortgage, there are some key things to keep in mind before you close. Here’s a list of things you may not realize you need to avoid after applying for your home loan.

Don’t Deposit Large Sums of Cash

Lenders need to source your money, and cash isn’t easily traceable. Before you deposit any amount of cash into your accounts, discuss the proper way to document your transactions with your loan officer.

Don’t Make Any Large Purchases

It’s not just home-related purchases that could disqualify you from your loan. Any large purchases can be red flags for lenders. People with new debt have higher debt-to-income ratios (how much debt you have compared to your monthly income). Since higher ratios make for riskier loans, borrowers may no longer qualify for their mortgage. Resist the temptation to make any large purchases, even for furniture or appliances.

Don’t Cosign Loans for Anyone

When you cosign for a loan, you’re making yourself accountable for that loan’s success and repayment. With that obligation comes higher debt-to-income ratios as well. Even if you promise you won’t be the one making the payments, your lender will have to count the payments against you.

Don’t Switch Bank Accounts

Lenders need to source and track your assets. That task is much easier when there’s consistency among your accounts. Before you transfer any money, speak with your loan officer.

Don’t Apply for New Credit

It doesn’t matter whether it’s a new credit card or a new car, when you have your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.), it will have an impact on your FICO® score. Lower credit scores can determine your interest rate and possibly even your eligibility for approval.

Don’t Close Any Accounts

Many buyers believe having less available credit makes them less risky and more likely to be approved. This isn’t true. A major component of your score is your length and depth of credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both of those aspects of your score.

Do Discuss Changes with Your Lender

Be upfront about any changes that occur or you’re expecting to occur when talking with your lender. Blips in income, assets or credit should be reviewed and executed in a way that ensures your home loan can still be approved. If your job or employment status has changed recently, share that with your lender as well. Ultimately, it’s best to fully disclose and discuss your intentions with your loan officer before you do anything financial in nature.

Bottom Line

You want your home purchase to go as smoothly as possible. Remember, before you make any large purchases, move your money around, or make major life changes, be sure to consult your lender – someone who’s qualified to explain how your financial decisions may impact your home loan.

Mortgage rates have been a hot topic in the housing market over the past 12 months. Compared to the beginning of 2022, rates have risen dramatically. Now they’re dropping, and that has to do with everything happening in the economy.

Nadia Evangelou, Senior Economist and Director of Forecasting at the National Association of Realtors (NAR), explains it well by saying:

“Mortgage rates dropped even further this week as two main factors affecting today's mortgage market became more favorable. Inflation continued to ease while the Federal Reserve switched to a smaller interest rate hike. As a result, according to Freddie Mac, the 30-year fixed mortgage rate fell to 6.31% from 6.33% the previous week.”

So, what does that mean for your homeownership plans? As mortgage rates fluctuate, they impact your purchasing power by influencing the cost of buying a home. Even a small dip can help boost your purchasing power. Here’s how it works.

The median-priced home according to the National Association of Realtors (NAR) is $379,100. So, let’s assume you want to buy a $400,000 home. If you’re trying to shop at that price point and keep your monthly payment about $2,500-2,600 or below, here’s how your purchasing power can change as mortgage rates move up or down (see chart below). The red shows payments above that threshold and the green indicates a payment within your target range.

This goes to show, even a small quarter-point change in mortgage rates can impact your monthly mortgage payment. That’s why it’s important to work with a trusted real estate professional who follows what the experts are projecting for mortgage rates for the days, months, and year ahead.

Bottom Line

Mortgage rates are likely to fluctuate depending on what happens with inflation moving forward, but they have dropped slightly in recent weeks. If a 7% rate was too high for you, it may be time to contact a lender to see if the current rate is more in line with your goal for a monthly housing expense.

If you're about to buy a condo or home in Boston, it pays to remember that price and timeline are not the only things to be mindful of. There are contingencies that your sale that are in place for your protection, and you'll need to pay attention to them.Most of the contingencies are to be completed prior to your signing the "Purchase and Sale" contract (also called the "P & S").First on your list is the inspection contingency. You'll set up an inspection for the first few days after having had your offer accepted and put under agreement. If there are inspection issues of concern, this gives time to resolve them before you move on to the P & S. As stated in the Greater Boston Real Estate Board's addendum form, the contingency exists to protect you from "serious mechanical, structural, or other defects." A threshold dollar figure is inserted in the form (usually $1,000 for repairs), above which the buyer can opt out of the transaction. Typically, buyer and seller come to some sort of negotiated agreement on repairs. I generally encourage my buyers to get a credit rather than have the seller do the repairs because youll want to make sure such repairs are done to your satisfaction. Again, these issues should be agreed to prior to signing your P & S.Next, have your attorney (always use an attorney!) look over the condo documents and the association financials to ensure that the association was properly set up and in sound legal standing. Make sure you know policies on pets, insurance, rentals, and any other policies. Your attorney will know what is important to know. You should also review the financials and, if you can, it's often helpful to talk with the association trustee(s) or management to learn the association's financial footing. Ask if there are reserves. Ask if there is work coming up on the building, and who will pay for it. Ask if there are other issues within the association you should know about. Your attorney and your agent will help you gather the necessary information.Your last contingency, assuming you are financing your purchase, is your ability to obtain a mortgage. You'll need to have made a full mortgage application by a certain specified date, and you should get the ball rolling on that as soon as your offer is accepted. The date should be the day after the signing of the P & S, because lenders will need the P & S to make an application.There's a second important date, and I can't overstate the importance of this. It's the mortgage commitment date; the date by which your mortgage contingency expires. If this date should pass and you've failed to get a mortgage and can't buy the property, you're in danger of losing your deposit.Here's my more detailed transaction guide.If youhavequestions about buying or selling Boston real estate, please call me at617-584-9790, or send me an email via the link below.   

Getting pre-approved for mortgage financing falls under the category of boring but necessary. I like to revisit this topic now and then, however, because I believe the single most important thing you can do beforebeginningyour home search is to get a pre-approval letter from a lender. If you plan on buying a Boston area condo or home, and you are not paying cash, you should get pre-approved for a loan.Having a pre-approval letter minimizes unwelcome surprises further along in the homebuying process. It's possible you think you know how muchyou can afford to buy, but the pre-approvalprocess clarifies that.It also has the benefit of showing sellers that you have homebuying credential. A pre-approval letter states that the lender will commit, in advance, to approving you for a certain loan amount. This is provided that youve given accurate information, and it is contingent upon certain aspects of the property you intend to purchase. Without seeing a copy of your pre-approval letter, sellerswon't want to take their property off the market and miss out on other potential buyers. Boston homebuyers are in high competition because of the tight inventory of properties, soI recommend submiting your pre-approval letter with your offer to purchase. Its important to give the seller the security ofknowing you have been pre-approved for financing.Time is of the essenceif other buyers bidon the same property, having this key piece of informationready forthe seller gives you a distinct advantage over buyerswhohavent taken the time to be prepared.Once you make an offer on a home, you are under no obligation to work with the lender who pre-approved you.You canstill shop around with otherlenders. I encourage you to do that, in fact, as ithelps you to become familiar with concepts and options of such things as closing costs, mortgage rates and programs, and pre-payment penalties. But those are not decisions you need to make immediately, as long as you get your pre-approval letter in hand for your home search.I know ofseveral good local lenders who can quickly pre-approve you, as well as having goodservice and rates, and an understanding of the local market. If youd like to know more, click the blue Questions? Get in touch! button at the endof this post.Here are other thingsyou should know whenpurchasing a property in Boston.Are you pondering which neighborhoods best suit you and your needs? Heresinformation aboutBoston neighborhoods.To learn more about the Boston real estate market, call me at617-584-9790 or click the button below.In my 25 years in the Boston real estate market, I have helped hundreds of people buy and sell Boston condos.I am committed to providing my clients with all the information necessary to make gooddecisions.   

Boston Real Estate Headlines:

• Alexandria Launches Life Science Startup Platform at One Kendall Square in Cambridge
• Heres How Fast Homes are Selling in the Boston Metro Area
• Building Boston: A Chat with Robert Verrier of the Architectural Team, Inc.

Featured Boston Real Estate:

• 35 Fay Street, #609, South End $550,000
• 25 Channel Street, #PH-102, Seaport $2,529,000
• 80 Broad Street, #PH-1102, Waterfront $1,799,000

With interest rates likely to increase soon, I thought I wouldshare aBoston Globe article about how upcoming changes may affect home buyers.Written by Paul Anastos, a frequent national mortgage speaker and an authority on residential home loans, the article explains how the Federal Reserve works in regards to keeping the nation's financial system safe.Home loan rates tend to stay in step with Treasury Bond rates. These bonds serve as a way of funding government operations by providing a way for the nation to borrow money.The Federal Reserve's Open Market Committeeregularly reviews the market to make decisions about interest rates, securities, and other conditions that may affect interest rates and how easy (or not) it is to get home loan financing.As Anastos explains, a shift in interest rates might be felt eithernegatively or positively depending on what it is you're looking to accomplish:

High interest rates make borrowing more expensive, so you end up paying more for home and car loans. On the other hand, your savings and money market accounts will earn higher interest. When interest rates are kept low, the opposite occurs. People earn lower interest on savings, but they can more easily borrow money.

If your goal is to buy a home soon, you may want to consider his advice to speak with a local lending officer to lock in a rate while they are still low.Read the Boston Globe's How Fed Rate Changes Affect Home Buyers.Are you thinking about where to livein Boston?If you have questions about buying or selling homes in the Boston real estate market, please call me at617-584-9790, orsend me an email via the linkbelow.  

Boston Real Estate Headlines:

• Bostons Luxury Housing Boom Slows Down
• Condo Hits Heights on Beacon Hill
• A Hot Summer for Home Sales Has Continued into Fall
• Marine Wharf Hotel to Check in to the Southie Waterfront

Featured Boston Real Estate:

• 31 High Street, Charlestown $2,750,000
• 32 Derne Street, #3C, Beacon Hill $2,495,000
• 130 Appleton Street #3H, South End $965,000