More than 60% of U.S. renters say they’d buy a home if their lease ended this month. But is February 2023 a good time to buy? We think it is and here are a few reasons why:
- First-time home buyers are getting mortgage rates below 6% and some even lower than 5% with a seller credit to buy down the rate.
- Home values aren’t headed to a crash
- Home sellers are giving in to home buyer demands
Mortgage Rates Are Below 6 Percent
Mortgage rates peaked 12 weeks ago. They’re much lower now. According to Freddie Mac, February 2023 begins with the average 30-year, fixed-rate conventional mortgage rate at 6.13 percent. For many first-time buyers, the rate is even lower. In December, the government introduced new rules to reduce mortgage rates for low- and moderate-income home buyers. Then, in mid-January, it introduced a second set of rules to lower interest rates on low-down payment mortgages for everyone. Market forces are also improving rates. Consumer costs dropped in most economic sectors last month, so the Federal Reserve is less likely to raise borrowing costs. As mortgage rates go down, purchasing power goes up. For the same mortgage payment, February home buyers can buy 15 percent more home as compared to three months ago, and analysts expect rates to drop again over the next 60 days. Wall Street believes that the Federal Reserve stopped economic inflation and engineered a soft landing for the U.S. economy. When inflation pressures retreat, so do mortgage rates.
Home Values Aren’t Headed For A Crash
The U.S. housing market isn’t headed for a crash, and data suggests that a market bottom is already here. According to real estate data company Altos Research, February 2023 begins with just 466,000 single-family homes for sale, marking the tightest home inventory since last June. Altos Research also reports an uptick in home sales. February begins with 264,000 homes under contract to sell, representing a 12 percent jump from the New Year. And according to the National Association of REALTORS®, more than half of homes sold sold within a month. Home buyer activity is up sharply this year, too. Homebuyer.com data shows a 73.9 percent jump in mortgage applications in January compared to the prior month, and search traffic for first-time home buyer queries such as “first-time home buyer grants” and “what credit score do you need to buy a house” doubled in the same period. At the current pace of home sales, NAR reports, buyers would buy up every U.S. home listed for sale before the start of June. Data points like these are the hallmarks of healthy, expanding markets.
Sellers Are “Throwing Money” At Buyers Right Now
A third reason why February 2023 is a good time to buy a home, to borrow a phrase from Axios, is “sellers are throwing money at buyers right now.” A sample of real estate contracts shows 42% of home sellers gave concessions to buyers recently, including money for home repairs, closing costs, and mortgage rate buydowns. Another one-third of sellers lowered their home’s sale price to make their homes more attractive to buyers. Today’s home sellers behave like they’ve lost their leverage over buyers. The data suggests they haven’t. For buyers, the current housing climate represents opportunity. Buyers can make demands, and those demands get met by sellers. Between now and late March, buyers will retain this advantage and can buy terrific homes at lower, more affordable prices.
Mortgage Rate Discounts For First-Time Buyers
Effective immediately, eligible first-time buyers get automatic mortgage rate discounts on their conventional mortgage loans. Through the FHFA First-Time Home Buyer Mortgage Rate Discount, low- and moderate-income first-time buyers can purchase a primary home, finance it with a conventional fixed-rate or adjustable-rate mortgage, and get a discounted mortgage rate. The FHFA First-Time Home Buyer Mortgage Rate Discount changes the math of “Should I rent or buy a home?” The money-saving program is valid for single-family homes, condos, townhomes, and multi-unit properties. Qualified buyers automatically get mortgage rate discounts of up to 1.75 percentage points off their mortgage rate, with no additional documentation. The discount program is temporary, another reason why February 2023 is a good time to buy a home. Once the program’s gone, mortgage rates go up.
Buying A Home With A Small Down Payment
For many first-time home buyers, when it’s time to buy a home, it’s time to buy a home – it doesn’t matter whether current interest rates are too high, available home supplies are too low, or there’s enough money saved up in the bank.
Homeownership can’t always wait. Thankfully, first-time buyers can achieve their American Dream of homeownership without having 20 percent saved for a down payment. Buyers can use several government-backed low down payment mortgages and down payment assistance programs available to eligible buyers. Plus, it’s getting easier to get a mortgage approved. Lenders have lowered minimum credit score requirements for certain low- and zero-down loans and Congress also is stepping in to assist. Nine homeownership and affordable housing bills are working through Congress to give first-time buyers programs tax credits, cash grants, and other purchase incentives.
Buying A Home Into The 2023 Housing Market
February 2023 is a good time to buy your first home. Mortgage rates are down, home prices are settled, and buyers have leverage over sellers. Our advice for today’s home buyers:
- First, do your mortgage pre-approval. Mortgage pre-approvals use today’s mortgage rates to tell you how much home you can afford and set realistic boundaries for your home search.
- Every successful purchase starts with a good pre-approval. It’s never too early to get one.
- Second, do work on your credit score. Review your credit report for errors and supplement your monthly bill-paying with a credit-building service such as StellarFi that can work in as few as 30 days.
- Third, research down payment assistance programs in your area via the HUD website. Some programs may have been discontinued or defunded in the new year, so call the local provider to verify availability.
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