This 6-6-6 sign is indeed a great omen for buyers!
Back in September, I explained in a video post the troubles ahead for our market as 30-yr mortgage rates hit 7% for the first time in 20 years. Homes were becoming increasingly unaffordable as high rates and home values squeezed many would-be buyers out of the market.
Thankfully, some balance has been restored as both rates and values have receded, meaning there is now hope ahead for the market. Today I want to walk you through some points to see how today’s affordability is back in line with historical norms, and why if you are a buyer you should be getting excited for a home purchase in the year ahead. Either click on the video above or read below for the full insight.
First a brief history overview…over this past summer, annual inflation was running at over 8% and consistently higher than market forecasts. There seemed to be no end in sight for price increases everywhere, including rates for mortgages. As a result, mortgage rates skyrocketed from 5% to nearly 7.5% in 2 months.
That’s when I did my last post on this topic to sound the alarms about housing becoming increasingly unaffordable. I compared the present market to the last time rates hit 7% in 2002 and the last time home values peaked in 2005 to show today’s market was less affordable than either of those eras. This was gauged by the percentage of income going to buying a median priced home by a household earning median income.
I illustrated how either home values would need to fall 21% or rates drop to 4% for the market to come back in balance, and I ultimately forecasted that we would see decreases in both in the months ahead.
That projection has mostly played out, largely thanks to inflation readings falling faster than expected. Mortgage rates have slid back down to 6% and home values have dropped another 9% since August.
The US Census Department also recently released an updated estimate for Sacramento household median income, which saw an expected increase due to inflation pressures as well.
When accounting for these market changes, the percentage of income going to a mortgage payment is no longer at record highs. In other words, we should not expect home values to continue to fall due to affordability issues. Now, will they still fall anyways? Perhaps they do still fall a bit further because markets don’t always act logically and predictably.
But that’s all the more reason if you’re a buyer and have been waiting to purchase to jump back in the market. These stats show support for current market values, and the short-term projection is for mortgage rates to remain at or below 6%. Many sellers are panicking as the average listing is on the market for 6 weeks and selling for 6% off their asking prices.
These 3 sixes are a literal jackpot sign for buyers entering the market. Thru January we’ve seen signs of the market picking back up and home prices stabilizing, so buyers should feel confident getting out there and ahead of the spring time rush.
Let my team and I help you get pre-approved for financing, find the right home in your area that meets your budget, and negotiate a deal for you in this buyer’s market. We’re here to help you from start to finish, so please reach out with any questions and interest you have on buying a home now or in the future.