Western Mass Homes Lesley Lambert

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When Rates Dip Below 6%, Sellers Gain Leverage: A Western MA & NW CT View

Mortgage rates have recently dipped below 6%, and most of the conversation is focused on buyers.

Lower rates improve affordability. Buyers qualify more easily. Monthly payments soften slightly.

But there is another side to this story — and it matters if you are a homeowner thinking about listing.

When rates ease, even modestly, more buyers enter the market. Buyers who were previously on the sidelines may re-engage. Buyers who were stretching before may now qualify more comfortably. And in Western Massachusetts and Northwest Connecticut, where inventory remains limited in many price ranges, that shift can strengthen a seller’s position.

More buyers means more activity.

More activity can mean stronger offers.

Stronger offers often mean cleaner terms.

And cleaner terms create leverage.

Why This Matters If You’re Considering Listing

If you have been quietly asking yourself whether this is the right time to sell, rate movement is one of the signals worth paying attention to.

It does not mean you must rush.

It does mean the dynamic can change faster than people expect.

Many long-term homeowners hesitate not because the market is bad, but because they are waiting for clarity. They want to understand whether they are stepping into strength or uncertainty.

When buyer affordability improves, sellers often step into strength.

That does not guarantee bidding wars.

But it can increase negotiating power, reduce risk, and create momentum.

The Western MA & Northwest CT Factor

Our local markets do not move exactly like national headlines suggest. Towns like Westfield, Southwick, Granby CT, and Simsbury CT each have their own inventory patterns and buyer behavior.

In a supply-constrained micro-market, a modest rate drop can have an outsized impact.

That is why looking at national news alone is not enough. Local leverage is built on local conditions.

If you have owned your home for many years and are beginning to wonder whether this is your window, now may be a smart time to evaluate your position.

Not from a place of urgency.

From a place of clarity.

If you would like to talk through what this shift means for your specific property and neighborhood, I am always happy to have that conversation.

Lesley Lambert, REALTOR for Park Square Realty serving Western MA and Northwest CT. 413-575-3611

4 Graphs that demonstrate why this is NOT a housing bubble

A recent survey revealed that many consumers believe there’s a housing bubble beginning to form. That feeling is understandable, as year-over-year home price appreciation is still in the double digits. However, this market is very different than it was during the housing crash 15 years ago. Here are four key reasons why today is nothing like the last time.

1. Houses Are Not Unaffordable Like They Were During the Housing Boom

The affordability formula has three components: the price of the home, wages earned by the purchaser, and the mortgage rate available at the time. Conventional lending standards say a purchaser should not spend more than 28% of their gross income on their mortgage payment.

Fifteen years ago, prices were high, wages were low, and mortgage rates were over 6%. Today, prices are still high. Wages, however, have increased, and the mortgage rate, even after the recent spike, is still well below 6%. That means the average purchaser today pays less of their monthly income toward their mortgage payment than they did back then.

In the latest Affordability Report by ATTOM Data, Chief Product Officer Todd Teta addresses that exact point:

“The average wage earner can still afford the typical home across the U.S., but the financial comfort zone continues shrinking as home prices keep soaring and mortgage rates tick upward.”

Affordability isn’t as strong as it was last year, but it’s much better than it was during the boom. Here’s a chart showing that difference:

4 Simple Graphs Showing Why This Is Not a Housing Bubble | Keeping Current Matters

If costs were so prohibitive, how did so many homes sell during the housing boom?

2. Mortgage Standards Were Much More Relaxed During the Boom

During the housing bubble, it was much easier to get a mortgage than it is today. As an example, let’s review the number of mortgages granted to purchasers with credit scores under 620. According to credit.org, a credit score between 550-619 is considered poor. In defining those with a score below 620, they explain:

“Credit agencies consider consumers with credit delinquencies, account rejections, and little credit history as subprime borrowers due to their high credit risk.”

Buyers can still qualify for a mortgage with a credit score that low, but they’re considered riskier borrowers. Here’s a graph showing the mortgage volume issued to purchasers with a credit score less than 620 during the housing boom, and the subsequent volume in the 14 years since.

4 Simple Graphs Showing Why This Is Not a Housing Bubble | Keeping Current Matters

Mortgage standards are nothing like they were the last time. Purchasers that acquired a mortgage over the last decade are much more qualified. Let’s take a look at what that means going forward.

3. The Foreclosure Situation Is Nothing Like It Was During the Crash

The most obvious difference is the number of homeowners that were facing foreclosure after the housing bubble burst. The Federal Reserve issues a report showing the number of consumers with a new foreclosure notice. Here are the numbers during the crash compared to today:

4 Simple Graphs Showing Why This Is Not a Housing Bubble | Keeping Current Matters

There’s no doubt the 2020 and 2021 numbers are impacted by the forbearance program, which was created to help homeowners facing uncertainty during the pandemic. However, there are fewer than 800,000 homeowners left in the program today, and most of those will be able to work out a repayment plan with their banks.

Rick Sharga, Executive Vice President of RealtyTrac, explains:

“The fact that foreclosure starts declined despite hundreds of thousands of borrowers exiting the CARES Act mortgage forbearance program over the last few months is very encouraging. It suggests that the ‘forbearance equals foreclosure’ narrative was incorrect.”

Why are there so few foreclosures now? Today, homeowners are equity rich, not tapped out.

In the run-up to the housing bubble, some homeowners were using their homes as personal ATM machines. Many immediately withdrew their equity once it built up. When home values began to fall, some homeowners found themselves in a negative equity situation where the amount they owed on their mortgage was greater than the value of their home. Some of those households decided to walk away from their homes, and that led to a rash of distressed property listings (foreclosures and short sales), which sold at huge discounts, thus lowering the value of other homes in the area.

Homeowners, however, have learned their lessons. Prices have risen nicely over the last few years, leading to over 40% of homes in the country having more than 50% equity. But owners have not been tapping into it like the last time, as evidenced by the fact that national tappable equity has increased to a record $9.9 trillion. With the average home equity now standing at $300,000, what happened last time won’t happen today.

As the latest Homeowner Equity Insights report from CoreLogic explains:

“Not only have equity gains helped homeowners more seamlessly transition out of forbearance and avoid a distressed sale, but they’ve also enabled many to continue building their wealth.”

There will be nowhere near the same number of foreclosures as we saw during the crash. So, what does that mean for the housing market?

4. We Don’t Have a Surplus of Homes on the Market – We Have a Shortage

The supply of inventory needed to sustain a normal real estate market is approximately six months. Anything more than that is an overabundance and will causes prices to depreciate. Anything less than that is a shortage and will lead to continued price appreciation. As the next graph shows, there were too many homes for sale from 2007 to 2010 (many of which were short sales and foreclosures), and that caused prices to tumble. Today, there’s a shortage of inventory, which is causing the acceleration in home values to continue.

4 Simple Graphs Showing Why This Is Not a Housing Bubble | Keeping Current Matters

Inventory is nothing like the last time. Prices are rising because there’s a healthy demand for homeownership at the same time there’s a shortage of homes for sale.

Bottom Line

If you’re worried that we’re making the same mistakes that led to the housing crash, the graphs above show data and insights to help alleviate your concerns.

Lesley Lambert, Western MA REALTOR with Park Square Realty Call/text: 413-575-3611. Email: realestate.lesleylambert@gmail.com

source:https://www.keepingcurrentmatters.com/2022/02/17/4-simple-graphs-showing-why-this-is-not-a-housing-bubble/?utm_campaign=Blog_Promo&utm_content=DailyBlog&utm_medium=social&utm_source=facebook&hss_channel=fbp-295788075627

A Return to ‘Normal’? The State of Real Estate in 2022 | Western Massachusetts

A Return to ‘Normal’? The State of Real Estate in 2022 | Western Massachusetts

Last year was one for the real estate history books. The pandemic helped usher in a buying frenzy that caused home prices to soar nationwide by a record 19.9% between August 2020 and August 2021.1

However, there were signs in the fourth quarter that the red-hot housing market was beginning to simmer down. In the month of October, only 60.3% of sales involved a bidding war—down from a high of 74.5% in April.2 While this trend could be attributed to seasonality, it could also be a signal that the real estate run-up may have passed its peak.

So what’s ahead for the U.S. housing market in 2022? Here’s where industry experts predict the market is headed in the coming year.

MORTGAGE RATES WILL CREEP UP

Most economists expect to see mortgage rates gradually rise this year after hitting record lows in late 2020 and early 2021.3 

Freddie Mac forecasts the 30-year fixed-rate mortgage will average 3.5% in 2022, up from around 3% in 2021.4

The Mortgage Bankers Association predicts that rates will tick up to 4% by the end of the year. “Mortgage lenders and borrowers should expect rising mortgage rates over the next year, as stronger economic growth pushes Treasury yields higher,” said Mike Fratantoni, chief economist for the Mortgage Bankers Association at their 2001 Annual Convention & Expo in October.5

However, it’s important to keep in mind that even a 4% mortgage rate is low when compared to historical standards. According to industry trade blog The Mortgage Reports, “Between 1971 and December 2020, 30-year mortgage rates averaged 7.89%.”6

What does it mean for you? Low mortgage rates can reduce your monthly payment and make homeownership more affordable. Fortunately, there’s still time to lock in a historically-low rate. Whether you’re hoping to purchase a new home or refinance an existing mortgage, act soon before rates go up any further. We’d be happy to connect you with a trusted lending professional in our network.

THE MARKET WILL BECOME MORE BALANCED

In 2021, we experienced one of the most competitive real estate markets ever. Fears about the virus and a shift to remote work triggered a huge uptick in demand. At the same time, many existing homeowners delayed their plans to sell, and supply and labor shortages hindered new construction.

This led to an extreme market imbalance that benefitted sellers and frustrated buyers. According to George Ratiu, director of economic research at Realtor.com, “Prices and sellers reached for the moon [last] year. It looks like we are now about to move back to earth.”7

Data from Realtor.com released in November showed that listing price reductions had more than doubled since February 2021. And the average days on market (an indicator of how long it takes a home to sell) has been slowly creeping up since June.7

What’s causing this change in market dynamics? The real estate market typically slows down in the fall and winter. But economists also suspect a fundamental shift in supply and demand.

At the National Association of Realtors’ annual conference last November, the group’s chief economist, Lawrence Yun, told attendees that he expects increased supply to come from an uptick in new construction—which is already underway—and an end to the mortgage forbearance program. “With more housing inventory to hit the market, the intense multiple offers will start to ease,” he said.8

Demand is also predicted to wane slightly in the coming year. Rising mortgage rates and record-high prices have made homeownership unaffordable for a growing number of Americans. And in a recent Reuters poll, nearly 80% of property analysts said they expect housing affordability to worsen over the next several years.9

What does it mean for you? If you struggled to buy a home last year, there may be some relief on the horizon. Increased supply and softening demand could make it easier to finally secure the home of your dreams. If you’re a seller, it’s still a great time to cash out your big equity gains! And with more inventory on the market, you’ll have an easier time finding your next home. Reach out for a free consultation so we can discuss your specific needs and goals.

HOME PRICES LIKELY TO KEEP CLIMBING, BUT AT A SLOWER PACE

Nationally, home prices rose an estimated 16.8% in 2021.8 But the average rate of appreciation is expected to slow down in 2022.

Danielle Hale, chief economist at Realtor.com, told Yahoo! News, “Home asking prices have decelerated in the second half of 2021, with median listing price growth slipping from a peak of 17.2% in April to just 8.6% in October.”10

But experts disagree about how much more property values can continue to climb this year. Goldman Sachs predicts that home prices will rise by 13.5%, while Fannie Mae and Freddie Mac are forecasting a 7.9% and 7% rate of appreciation, respectively.2

However, not all analysts are as bullish. The National Association of Realtors predicts a 2.8% rate of appreciation for existing homes and 4.4% for new homes, while the Mortgage Bankers Association expects the average home price to decrease by 2.5% by the end of the year.10,2

According to Hale, “With prices near all-time highs and mortgage rates expected to rise, we expect this slowdown in prices to continue.”10

What does it mean for you? If you’re a buyer who has been waiting on the sidelines for home prices to drop, you may be out of luck. Even if home prices dip slightly (and most economists expect them to rise) any savings are likely to be offset by higher mortgage rates. The good news is that decreased competition means more choice and less likelihood of a bidding war. We can help you get the most for your money in today’s market.

RENTS WILL CONTINUE TO RISE

Along with home, gasoline, and used vehicle prices, rent prices rose dramatically last year. According to CoreLogic, in September, rents for single-family homes were up 10.2% nationally year over year.11 And economists at Realtor.com expect them to climb another 7.1% in 2022.12

“Homes are expensive now…but for most people, the comparison that is most important is how that cost of homeownership is going to compare to the cost of renting,” Zillow Senior Economist Jeff Tucker told CNBC in November.13

Tucker also pointed out that rent is less predictable than a mortgage—and more likely to go up along with inflation.13

Real assets, like real estate, are often used as a hedge against inflation. That’s because property values typically rise with inflation.14 And when a homeowner takes out a mortgage, they lock in a set housing payment for the next 30 years.

In contrast, renters are at the mercy of the market—and they don’t gain any of the benefits of homeownership, like tax deductions, equity, or appreciation.

George Ratiu of Realtor.com told CNBC that he advises buyers to consider their budget and time frame. If they plan to stay in the home for at least three to five years, he believes it often makes sense to buy.13

Fortunately, it’s shaping up to be a better year for buyers. “I think 2022 has the promise of providing less competition, a lot more homes to choose from, and, as a result, a lot more approachable prices,” Ratiu said.13

What does it mean for you? Both property and rent prices are expected to continue rising. But when you purchase a home with a fixed-rate mortgage, you can rest assured knowing that your monthly mortgage payment will never go up. Whether you’re a first-time homebuyer or a real estate investor, we can help you make the most of today’s real estate market.

HERE TO GUIDE YOU

While national real estate numbers and predictions can provide a “big picture” outlook for the year, real estate is local. And as local market experts, we can guide you through the ins and outs of our market and the local issues that are likely to drive home values in your particular neighborhood. 

If you’re considering buying or selling a home in 2022, contact me now to schedule a free consultation. I’ll work with you to develop an action plan to meet your real estate goals this year.

Lesley Lambert, Western MA REALTOR with Park Square Realty 413-575-3611

Sources:

  1. Fortune –
    https://fortune.com/2021/11/04/us-home-prices-real-estate-forecast-2022-outlook/
  2. Fortune –
    https://fortune.com/2021/11/29/housing-market-real-estate-predictions-2022-forecast/
  3. Freddie Mac –
    http://www.freddiemac.com/pmms/pmms30.html
  4. Freddie Mac – https://freddiemac.gcs-web.com/news-releases/news-release-details/freddie-mac-strong-housing-market-will-continue-even-rates-and
  5. Mortgage Bankers Association –
    https://www.mba.org/2021-press-releases/october/mba-annual-forecast-purchase-originations-to-increase-9-percent-to-record-173-trillion-in-2022
  6. The Mortgage Reports –
    https://themortgagereports.com/61853/30-year-mortgage-rates-chart
  7. Realtor.com –
    https://www.realtor.com/news/trends/has-housing-market-peaked/
  8. National Association of Realtors –
    https://www.nar.realtor/newsroom/nars-yun-says-housing-market-doing-well-may-normalize-in-2022
  9. Reuters –
    https://www.reuters.com/world/us/rise-us-house-prices-halve-next-year-affordability-worsen-2021-12-07/
  10. Yahoo! News –
    https://www.yahoo.com/now/where-home-prices-headed-2022-130012748.html
  11. CNBC –
    https://www.cnbc.com/2021/11/16/inflation-rent-for-single-family-homes-surged-10percent-in-september.html
  12. Realtor.com –
    https://www.realtor.com/news/trends/what-to-expect-in-2022-housing-market/
  13. CNBC –
    https://www.cnbc.com/2021/11/23/rising-inflation-hot-housing-market-what-you-need-to-know-about-buying-a-home.html
  14. Money –
    https://money.com/inflation-2021-stocks-bitcoin-gold-reits-commodities/

Question: What Quarter of the Year Do You Think is Best in Western MA Real Estate?

Vacations are over. The kids are back in school. Life takes on a routine and people start thinking about making a move before the end of the year.

Question for you readers: what quarter of the year do you think is the best for real estate in Western MA?

Take a look at this short video to learn the answer to that AND to why you may want to get your house on the market NOW!

The real estate market in Western MA post Labor Day is set to be HOT HOT HOT!

So, if you watched the video you now know that the fourth quarter is traditionally the best quarter in Western MA real estate.

What that means is the houses that hit the market NOW are the ones that will close in the fourth quarter. The buyers are out there, if you are ready there is no reason to wait.

Let’s get together and discuss my unique marketing plan and what I can do for YOU to get you moved before the end of the year!

Lesley Lambert, Western MA REALTOR with Park Square Realty 413-575-3611

Think you should wait until Spring to sell your Western MA house? WRONG!

Here we are in the thick of winter, end of January with a couple more months of cold ahead of us in Western MA. You may be considering selling your house and are thinking to yourself that you want to wait for Spring because that is the best time to sell your home.

Well, you are wrong.

Now, if you can’t get your house ready for the market until Spring, then that is an issue and Spring will be the right time for you, BUT if your house is ready to go now then NOW is the best time!

In this Facebook Live video from earlier today I go into detail as to why now is the best time to sell your Western MA home:

If you are considering the idea of making a move, let’s get together to chat about the process. Meeting with me is painless and free and I love sharing my nearly 30 years of expertise with people!  Get in touch-

Lesley Lambert, Western MA REALTOR with Park Square Realty 413-575-3611