CHM Blog

Understanding today’s manic housing market means taking the time to learn what’s at play

Can the U.S. housing market experience a cool-down and remain in a frenzy at the same time? It can, according to Realtor.com’s Clare Trapasso.

“While it’s true that the housing market has cooled down—tremendously—from the madness that permeated that desperate hunt for real estate during the COVID-19 pandemic — adorable, turnkey homes in desirable locations are still receiving multiple offers and often selling for a premium,” she explains.

Seems opposites can happen at the same time. As the explosion of mortgage rates began scaring off many would-be home buyers, it scared off a huge number of sellers as well. After all — unless you’re thinking of moving to a different state, even if you sell for a huge profit, where can you turn around and buy something affordable, even if you’re downsizing? The fact is, there are still many more buyers than there are properties for sale. That means buyers pounce every time a move-in ready home with curb appeal in a good school district goes up for sale. Those homes are selling briskly and with plenty of competition.

Who are the poor stepchildren in all this? The homes that need work, those in locations that may seem less appealing, and as always — the overpriced ones. “Buyers either can’t afford or aren’t willing to pay extra to upgrade these properties,” says Trapasso. “They’re grappling with significantly more expensive monthly mortgage payments than those of homeowners who bought two years ago. So first-time buyers seeking a turnkey home in a great community need to have a strategy in place if they want to be competitive.

What is that strategy, you may ask? Trapasso suggests forgetting about what’s happening in the national housing market and focusing locally. “It doesn’t matter if home prices are falling in one region of the country if they’re rising in yours.”

If you’re a buyer unclear on how all this is shaking out locally, arrange a meeting with an agent you might hire. Then begin the brain-picking in earnest. See how long homes are staying on the market, including those gorgeous turnkey houses. Are they selling for over, at, or under the asking price? Pore over the comps of comparable homes that have sold. “Your real estate agent should know if this is a market where you need to waive contingencies and kick in a high down payment to have an offer accepted—or if you can ask the seller to cover your closing costs,” says Trapasso. “Having this information can help you to figure out how much to offer, what to ask for, and what you might need to concede.”

There are countless stories of folks who just wanted to see what was out there and visit a few open houses before deciding if they wanted to buy a home. What happens, however, is that they fall in love with one of those properties before even having been pre-approved for a mortgage. That means they’re not sure if their credit scores are high enough to get a loan, and in turn, they lose the home to one of the six other offers the seller received from pre-approved buyers. Trapasso says to save yourself the heartache and get pre-approved for a mortgage before you start attending open houses. “This critical step will also help you home in on the price range that you can comfortably afford.”

Remember that the agent you work with is your partner and confidante in all this, helping you navigate this unfamiliar, emotional, and extremely stressful process. “It’s important that you find someone you trust with helping you make what might be the largest purchase of your life—one that you might spend the next 30 years paying off,” says Trapasso. "Get recommendations from friends, check online reviews, and make sure they have worked with buyers in a similar price range in the areas where you’re looking. Make sure this is someone who you’re comfortable with spending the next few months, or however long it takes, to find a home.” But don’t let your agent pressure you into putting in offers on homes that you either aren’t sure are right for you or offer more than you can afford. If that begins happening, find someone else.

What few sellers are out there are looking for a few guarantees wherever possible. They don’t want deals to fall apart or for their homes to languish on the market. Believe it or not, it’s not just heartache at play here. It’s appearances. When an escrow falls through, other buyers often assume there is something wrong with the home. If a seller is forced to accept a lowball offer or slash the asking price, they want to be as sure as they can be that the buyer they choose is going to complete the sale.

That’s why they tend to look more favorably on buyers who either pay cash or can kick in larger down payments. “If you’re one of the lucky buyers with more cash at your disposal, putting down at least 20% could help you to win a bidding war,” says Trapasso. “Plus, you won’t have to worry about paying private mortgage insurance every month.”

There is price, but there are also terms, because bidding wars aren’t won on price alone. You likely no longer need to waive inspections and appraisal contingencies or pay the transactional fees that sellers generally pick up, but it depends on the market you’re in. Trapasso suggests thinking about the things you’re comfortable offering. Can you close quickly? Can you offer the sellers a more flexible timeline to vacate the home—or even rent it back to them if they need to delay their own move?

And lastly, don’t drive past homes that have been sitting on the market for a while in a good location. It’s like the online date you decided to blow off but may have enjoyed meeting. “It’s what’s underneath that counts,” says Trapasso. “Some issues might be mostly cosmetic and a fresh coat of paint, some light work, and some refinished flooring might make a big difference. It doesn’t hurt to take a trip out to the home, see what you would want to have done, and then contact a local contractor to see what it would cost to have those issues addressed. If the property hasn’t had much interest, the sellers might be open to a lower offer. You can use the savings to fund the work.”

Realtor, TBWS

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market.  This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events.  When MBS pricing goes up, mortgage rates or pricing generally goes down.  When they fall, mortgage pricing goes up.  Tracking these securities real-time is critical.  For more information about the rate market, contact me directly.  I’m among few mortgage professionals who have access to live trading screens during market hours.

Rates Currently Trending: Neutral

Mortgage rates are moving sideways today. The MBS market improved by +1 bps last week. This was not enough to decrease mortgage rates or fees. The market experienced high volatility last week.

This Week's Rate Forecast: Neutral

Three Things: These are the three areas that have the greatest ability to impact rates this week. 1) Inflation, 2) Central Banks and 3) Treasury Sales.

1) Inflation: We will get key inflationary readings this week with both CPI and PPI. Expectations are for the MOM readings to rise again with the YOY numbers moving lower.

2) Central Banks: We will hear from the Bank of England which is expected to raise their key interest rate by 25 basis points.

3) Treasury Sales: We will focus primarily on Thursday's 30 year bond auction. Here is the schedule:

05/09 3 year note

05/10 10 year note

05/11 30 year bond

This Week's Potential Volatility: High

This morning markets have had a slight negative trend. Volatility has started high and will spike throughout the week on economic data.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

Richard Sardella has been actively managing and providing services in the mortgage industry for over 30 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.