If you feel a bit of whiplash hearing the varying takes on the housing market right now, you’re not alone. Home prices are still rising — but not as much! Mortgage rates are generally up — but recently they’ve held below 6%! (See the lowest mortgage rates you can get now here.) There are bidding wars galore — but not everywhere! That’s why MarketWatch Picks created a series where we ask prominent economists and real estate pros their take on the housing market now.
This week, we talk to Danielle Hale, who has been the chief economist at Realtor.com for the last five years. She’s responsible for developing and translating real estate trend data into consumer and industry insights. Before that, she worked as an economist at the National Association of Realtors (NAR) for nearly a decade. We asked her to share five things she thinks home buyers should know, given the current real estate market. (Realtor.com is owned by the same parent company as MarketWatch.)
‘Housing inventory has made the biggest about-face ever,’ but we’re still short on homes
Even though housing inventory has improved since last year, there’s still a shortage of options for home shoppers in today’s market, relative to what was normal before the pandemic. “Our June Housing Trends Report shows that housing inventory has made the biggest about-face ever in a one year period of time, rising 18.7% over this time last year,” says Hale.
1 in 7 homes on the market has now gotten a price cut
Hale says home prices are still growing at a faster than normal pace, but price reductions among sellers are more common this year than last year, even as they lag pre-pandemic levels. “Roughly 1 in 7 homes in June had a price reduction, up from roughly 1 in 13 in June 2021, but still below the 1 out of every 4 to 5 that was typical in 2017 through 2019. In short, the national market is resetting and the local area where you’re trying to buy may be on the leading or lagging edge of these trends,” says Hale. See the lowest mortgage rates you can get now here.
Pay attention to local conditions
“The local area where you’re trying to buy could be more or less buyer-friendly than the national data indicates,” says Hale. Hale says potential homebuyers should follow the data to know what’s going on in the housing market and may want to work with a real estate agent or pro to help them find the right home. “That will help them set more realistic expectations and keep up with trends that are evolving, in some respects in a more favorable direction for buyers,” says Hale.
Make sure you’re financially ready to buy
With the housing market poised for a reset and economic uncertainty ahead, it’s more important than ever to make sure you’re financially ready when making a home purchase. “Before you start shopping, take a hard look at your budget and figure out that you’re comfortable spending on housing each month. Mortgage calculators and lenders will advise you based on financial rules of thumb that suggest you should spend no more than 28% of your income on housing payments and no more than 36% to 50% on total debt payments, including housing, student loans and car loans,” says Hale. Remember, these are just general rules and your personal situation may mean you can afford more or less than is typical.