The sale of existing homes continues its rising trend, giving American owners confidence they can plan to either upsize or downsize this winter or with an early spring strategy.
The National Association of Realtors’ (NAR) latest survey found sales of existing homes in October was 1.2% higher than in the previous month of September.
This result suggests that with consistently strong prices but mortgage costs dipping below the mid-6% mark, Americans are increasingly deciding to change their situation after months of frustration with high interest rates.
NAR also noted first-time buyers are back and now represent one-third of all purchasers.
The real estate scene continues to be dominated by two dynamics – tight supply and sustained price appreciation.
The median existing-home sales price is now $415,200, which is 2.1% higher than 12 months ago and represents the 28th successive month of year-over-year price increases.
The average number of days a property is on the market continues to edge higher. It now stands at 34 days, compared with 29 days a year ago.
In its monthly survey, NAR said there were currently 1.52 million homes for sale. At the present rate of purchase, this represents 4.4 months of supply.
While prices and the number of sales increased, there was a slight drop (-0.7%) in owners putting their homes up for sale.
NAR says the key factor driving the October sales bump was the deceleration of mortgage rates, with the average 30-year fixed rate dropping to 6.25% from 6.35%.
Its chief economist, Lawrence Yun, said the fall in mortgage costs, combined with cooling rental prices, might encourage the Federal Reserve to ease its monetary policy.
The Fed’s current target range is 3.75%-4%, which follows a 0.25% reduction at the end of October. Our central bank has held out hope of another reduction before the end of the year.
Across the regions, the performance of real estate is inconsistent. The Midwest and South saw sales increases thanks to rising inventory. Meanwhile, supply is tight in the Northeast, where sales were flat. A decline was registered in the West, largely attributed to persistently high home prices. It has a median price of $628,500.
First-time buyers accounted for 32% of sales in October, indicating the dream of owning your own homes remains strong for many young Americans. Softening mortgage rates are proving to be their key motivating factor.
If you’re a first-time buyer seeking to break into the current market, here are six tips based on the NAR report:
Relocation strategy – The NAR report shows good buying opportunities exist in pockets of the US. So, rather than fighting high prices and low inventory in expensive coastal metros, explore high-growth, affordable markets in the Midwest and South, where supply is more plentiful.
Be optimistic – Consider a “buy now, refinance later” mortgage strategy. When mortgage costs fall further, price growth will accelerate. So waiting will cost you money. Consider securing a home at current market rates. When they begin to fall, you can refinance. Make sure your initial loan gives you maximum flexibility.
Down payment buffer – With prices rising for 28 successive months, the most effective defense against high home values is financial preparedness. Focus aggressively on maximizing your down payment. A larger down payment reduces the size of your mortgage and lowers your monthly payment. It can also make you a more competitive, lower-risk bidder in a seller’s market. Aim for 20% to avoid Private Mortgage Insurance.
Slow sellers – You can leverage the fact that properties are on the market for longer. If the average is 34 days, work with your agent to identify properties that have been for sale for 45 days or more. Owners of these homes may be willing to negotiate on price, closing costs or contingencies.
Prioritize pre-approval – Before you start serious home-hunting, get a pre-approved loan, which usually lasts for three months. Your pre-approval will set your budget and allow you to negotiate for a property with confidence. However, it’s not a loan. Your lender will want to know what you’re buying, and for how much, before issuing a mortgage. So, always make sure one of your contingencies is that your lender will turn its pre-approval into a fully fledged mortgage.