I’m the Chief Economist for the National Association of Realtors. Things To Know About the Housing Market: Massachusetts HomeOwners Homebuyers

 As mortgage rates inch upwards (you can see the lowest mortgage rates you may qualify for here) and home prices keep climbing, many aspiring buyers are wondering: What should I know about the housing market now? So as part of our series where we ask prominent economists about the housing market we talked to Dr. Lawrence Yun, who has been the chief economist at the National Association of Realtors since 2008, and its senior economist from 2000-2008. He oversees a range of research at the organization, including forecasts, existing home sales statistics, the affordability index and home buyers and sellers profile report. Here are his thoughts.

Buyers need to rerun numbers as mortgage rates rise

 With mortgage rates steadily inching upwards, Yun recommends that buyers rerun numbers as mortgage rates move higher. “The monthly mortgage payment may be more than what the buyer initially thought,” says Yun. As such, a buyer may want to revisit their budget and calculate sales prices and current mortgage rates to make sure they can actually afford and close on the home they’re considering. (See the lowest mortgage rates you may qualify for here.)

Inventory shortages persist

 It’s no secret that demand for housing outweighs the current supply, with Freddie Mac estimating that the United States is roughly three million homes short of meeting buyer demand. “Keep in mind that the inventory shortage still persists,” says Yun. Coupled with pandemic related supply and labor shortages and a forecast that approximately 1.2 million single family housing starts (new residential construction) will take place in 2023, according to data from Statista, inventory will likely remain an issue for years to come, therefore continuing to drive up home prices.

Home prices in general will remain high

 Combined with low inventory, inflation also plays a part in rising home prices as the Fed continues to raise interest rates causing mortgage rates to climb. But unlike the last housing bubble, lenders appear to be vetting borrowers more rigorously and according to Bankrate, mortgage borrowers’ credit scores remain near record highs at seven hundred and seventy six in the first quarter of 2022. “Home prices are high and unlikely to fall. Mortgage underwriting has been stringent with no funny, risky stuff,” says Yun.

Prepare for high prices on suburban homes in particular

 The work from home lifestyle instituted during the pandemic meant people ditched their pricey metropolitan digs for sprawling suburban spaces. “Buyers should realize suburban home prices have outpaced downtown home prices as more workers are expecting less frequent commutes to the office,” says Yun.

Some buyers may want to consider a 5-year ARM

 If there’s a possibility that a home buyer won’t be in the home they’re buying for more than five or so years, Yun says they should consider a five year ARM. “These ARMs carry lower interest rates than the standard thirty year mortgages,” says Yun. In fact, Bankrate data from the week ending June 6,2022 reveals that the average rate for a five year ARM is just 3.90 percent compared to an average rate of 5.57 percent for a thirty year fixed mortgage.

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