People Want Less Expensive Homes – And Builders Are Responding

In today’s housing market, there are two main affordability challenges impacting buyers: mortgage rates that are higher than they’ve been the past couple of years, and rising home prices caused by low inventory. To overcome those challenges, many people are working with their agents to find less expensive homes. And with newly built homes making up a historically large percentage of the total available inventory today, that search often includes brand new homes.People Are Spending Less on Newly Built HomesThe graph below uses the latest information from the Census to show, in June, more of the newly built home sales in this country were in lower price ranges than in 2022:Last year, only 58% of newly built home sales were less than $500,000. This June, that number was up to 65%. This means more people are buying less expensive newly built homes right now while affordability remains a challenge. Builders Are Offering Lower-Cost OptionsBuilders have picked up on this trend and are reacting accordingly. George Ratiu, Chief Economist at Keeping Current Matters, explains:“Builders are also responding to this shift by bringing slightly smaller homes to market in an effort to meet lower price points . . .”New data from the Census further confirms this pattern – it shows the median sales price of newly built homes has dipped down in recent months (see graph below):And as Mikaela Arroyo, Director of the New Home Trends Institute at John Burns Real Estate Consulting, says, the builders who are most responsive to this trend are forming pathways to homeownership: “. . . it is creating opportunities for people to be able to afford an entry-level home in an area. . . . if you get that size down, that automatically will make it a more affordable home. The [builders] that are decreasing [size] the most are probably the ones that try to build more of an affordable product.” How an Agent Can Help Builders producing smaller, less expensive newly built homes give you more affordable options at a time when that’s really needed. If you’re hoping to buy a home soon, partner with a local real estate agent to find out what’s available in your area. An agent can help you look at newly built homes or ones under construction nearby. Bottom LineIf you’re having a hard time finding a home you like in your budget, connect with a real estate professional. You need an agent who knows all about the latest inventory in your area, including homes still under construction or just built. That way you have an expert on your side who can provide information on builder reputations, builder contracts and negotiations, and more to help you with the homebuying process.

Don’t Expect a Flood of Foreclosures

The rising cost of just about everything from groceries to gas right now is leading to speculation that more people won’t be able to afford their mortgage payments. And that’s creating concern that a lot of foreclosures are on the horizon. While it’s true that foreclosure filings have gone up a bit compared to last year, experts say a flood of foreclosures isn’t coming.Take it from Bill McBride of Calculated Risk. McBride is an expert on the housing market, and after closely following the data and market environment leading up to the crash, he was able to see the foreclosures coming in 2008. With the same careful eye and analysis, he has a different take on what’s ahead in the current market:“There will not be a foreclosure crisis this time.”Let’s look at why another flood is so unlikely.There Aren’t Many Homeowners Who Are Seriously Behind on Their Mortgage PaymentsOne of the main reasons there were so many foreclosures during the last housing crash was because relaxed lending standards made it easy for people to take out mortgages, even if they couldn't show that they’d be able to pay them back. At that time, lenders weren’t being very strict when assessing applicant credit scores, income levels, employment status, and debt-to-income ratio.But now, lending standards have tightened, leading to more qualified buyers who can afford to make their mortgage payments. And data from Freddie Mac and Fannie Mae shows the number of homeowners who are seriously behind on their mortgage payments is declining (see graph below):Molly Boese, Principal Economist at CoreLogic, explains just how few homeowners are struggling to make their mortgage payments:“May’s overall mortgage delinquency rate matched the all-time low, and serious delinquencies followed suit. Furthermore, the rate of mortgages that were six months or more past due, a measure that ballooned in 2021, has receded to a level last observed in March 2020.”Before there can be a significant rise in foreclosures, the number of people who can’t make their mortgage payments would need to rise. Since so many buyers are making their payments today, a wave of foreclosures isn’t likely.Bottom LineIf you’re worried about a potential flood of foreclosures, know there’s nothing in the data today to suggest that’ll happen. In fact, qualified buyers are making their mortgage payments at a very high rate.

Equity Is a Game Changer for Homeowners Looking To Sell

If you’re a homeowner, you might be torn on whether or not to sell your house right now. Maybe that’s because you don’t want to take on a higher mortgage rate on your next home. If that’s your biggest hurdle, understanding your equity may be exactly what you need to help you feel more comfortable making your move.What Equity Is and How It WorksEquity is the current value of your home minus what you owe on the loan. And recently, that equity has been growing far faster than you may expect.Over the last few years, home prices rose dramatically, and that gave your equity a big boost very quickly. While the market has started to normalize, there’s still an imbalance between the number of homes available for sale and the number of buyers looking to make a purchase. And it’s because homes are in such high demand that prices are back on the rise today. Rob Barber, CEO of ATTOM, a property data provider, explains:“Equity levels were high even during the recent downturn, and now they are going back up and better than ever.”How Equity Benefits You in Today’s MarketWith today’s affordability challenges, that equity can be a game changer when you move. Here’s why. Based on data from ATTOM and the Census, nearly two-thirds (68.7%) of homeowners have either paid off their mortgages or have at least 50% equity (see chart below):That means roughly 70% have a tremendous amount of equity right now. Once you sell your house, you can use your equity to help with your next purchase. It could be some (if not all) of what you’ll need for your next down payment. It may even be enough to allow you to put a considerably larger down payment on your next home, so you don’t have to finance quite as much. And, if you’ve been in your current house for years, you may have even built up enough equity to pay in all cash. If that’s true for you, you’d be able to avoid borrowing altogether, so you wouldn’t have to worry about today’s mortgage rates.How To Find Out How Much Equity You Have The best way to learn how much you have is to reach out to a trusted real estate agent for a Professional Equity Assessment Report (PEAR).Bottom LineIf you’re planning to make a move, the equity you’ve gained can make a big impact. To find out just how much equity you have in your current home and how you can use it to fuel your next purchase, connect with a trusted real estate advisor.