I am the COO of a mortgage company that has financed over $100 billion in loans. Here are the 3 things you need to know about the housing market right now.

Steve Reich

Mortgage rates rose above 6% last week, according to Bankrate data, with some professionals saying they could rise further. (You can see the lowest mortgage rates you may qualify for here.) In addition, home prices have increased by more than 20% year over year, causing affordability challenges for many would-be homebuyers. And it’s probably making them wonder: what should I know if I want to buy a house now? So – as part of our series in which we asked prominent real estate professionals for their views on the real estate market – we spoke with Steve Reich. He is the COO of Finance of America Mortgage, a real estate finance company that says it has financed more than $105 billion in consumer loans since 2015, which has two decades of experience in mortgage processing, underwriting and more. Here are your thoughts on the housing market right now.

Accessibility challenges are very real now

“We saw home price appreciation cool down a bit towards the end of last year, but in the first half of 2022 we saw another reacceleration with home prices jumping nearly 20% year-over-year from February,” says Reich. Experts (such as Daryl Fairweather, Chief Economist at Redfin, who we also interviewed for this series) have noted that we are likely reaching a point where this type of growth can no longer be sustainable and, if that is the case, we can expect an appreciation. of house prices. slow down this year. “Regardless of that, in the short term, higher home price appreciation will have a significant impact on how many families can buy or exit the market,” says Reich.

Another thing to keep in mind is that rising rates can add more complications to the affordability issue. “On the one hand, I think the fear of missing out on the low rates has contributed to some of the price increases we’re seeing as potential buyers rush to get a home and get into bidding wars. In the long run, though, higher rates will hamper some buyers and ultimately hurt demand,” says Reich. (You can see the lowest mortgage rates you may qualify for here.)

Homeowners may be hesitant to sell their homes – which can add to the already tight housing stock

The housing stock is still at record levels. We are in “the first season of housing, when more families tend to put their homes up for sale and prepare to move in the summer after the school year,” notes Reich. But, he adds, “there is uncertainty about how much stock will be available. In fact, “for some homeowners who have set rates in the low 2% or 3% range, they may be hesitant to sell their home and look to buy a new home knowing they will pay more in interest rates now,” says Reich. .

On the new home construction side, while it is unclear what the full effects of prolonged inflation will be on the availability of new units in the future, the residual impact of supply chain issues, labor shortages and fuel price increases will likely continue to come in at new costs of building houses, personnel and other areas of the housing and real estate landscape, according to Reich.

To compete in this tough market, you may need a competitive offer

Given these factors, buyers should be aware that in order to compete in today’s market environment and have your offer accepted, you may need a strong bid. “Maybe you need to get creative: consider limiting contingencies in your offer if possible, and don’t ask for too much credit. Show sellers that you can be more flexible on the timeline, for example, offer a quicker closing or even let the seller do a relocation agreement if you need more time to move or find another home,” says Reich. Having a pre-approval letter in hand, a higher down payment and an early subscription can strengthen your offer financially and make you a more attractive buyer.

That said, the competitiveness of an offering varies from market to market (and, of course, from house to house) – with some markets much more and less competitive than others. In fact, Redfin’s Fairweather recently told MarketWatch Picks that we’re seeing the first signs that the housing market is starting to cool off, at least in expensive metro areas. “Buyers in markets like Los Angeles, San Francisco, Boston and Seattle who have lost in multiple bidding wars may find they are facing less competition from other buyers than they did a month or two ago,” says Fairweather.

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