Real Estate
As mortgage rates spike, Virginia’s housing market shifts
According to the March 2022 Virginia Home Sales Report released by Virginia REALTORS®, while the spring market is off to a strong start, there are some indications of changing market conditions.
Statewide, there were 11,446 home sales in March 2022, down 6% from a year ago. This decline is due to last year being an exceptionally busy market and also to the very low inventory which has provided buyers with very few options.
In March, Virginia’s median home sales price was $375,000—nearly 12% higher than in March of last year. While year-over-year sales slowed, Virginia did see a significant jump of more than 40% in sales between February and March 2022. This uptick reflects typical seasonal housing market patterns; however, this year, it was also likely fueled by the recent spike in mortgage rates.
Over the past few weeks, rates have risen faster than they have in nearly 30 years. In the second week of April, the average rate on a 30-year fixed-rate mortgage hit 5% for the first time in 11 years.
“Mortgage rates are rising more quickly than anticipated and will likely rise further during the year,” says Virginia REALTORS® Chief Economist Ryan Price. “Many buyers are eager to purchase a home before rates increase further.”
In Virginia, supply remains historically low; inventory is now less than a third of what it was five years ago. Intense competition resulted in homes selling for 2.6% higher than list price, on average, in March. This is the highest monthly average sold-to-list price ratio in at least a decade.
While these numbers may be daunting to potential buyers, there is some indication that supply is expanding. In March, Virginia’s inventory expanded with an uptick in new listings and a slight slowdown in buyer activity. At the end of March, there were about 1,500 more active listings statewide across Virginia, a 12.1% increase from the end of February.
“It is likely that Virginia’s inventory of homes for sale will expand over the coming months,” says Virginia REALTORS® 2022 President Denise Ramey. “Many sellers are feeling pressure from increasing mortgage rates, which will lead some to list their home for property now, before higher rates lead to less buyer interest.”
The Virginia Home Sales Report is published by Virginia REALTORS®. Click here to view the full March 2022 Virginia Home Sales Report.
Real Estate
Mortgage vocabulary explained
Getting a mortgage is an essential part of buying a property. Here’s a short glossary to familiarize you with the most important terms.
• Mortgage loan. A type of loan typically obtained from a financial institution to purchase a home or other real estate property. The property itself serves as collateral to secure the loan. Moreover, the lender reserves the right to seize the property if the payments aren’t made.
• Down payment. An upfront payment you make to purchase a property. The amount paid is usually a percentage of the purchase price and can range from as little as three percent to as much as 20 percent.
• Mortgage loan insurance. You must buy mortgage loan insurance if your down payment is less than 20 percent of the property’s price. The insurance can be paid upfront or added to your monthly payments.
• Interest rate. A fixed or variable percentage is added to the amount of your mortgage loan. In short, it’s the price you pay to the financial institution for taking on your loan.
• Amortization period. This refers to the length of time it takes to pay off your mortgage.
• Mortgage term. The length of your current mortgage contract is referred to as the term. After the mortgage term expires, the remaining balance must be renewed, refinanced, or paid in full.
• Pre-approval. When you get pre-approved for a mortgage, the lender estimates how much you might be able to borrow based on your income, credit history, assets, debt, and down payment.
Contact a mortgage broker in your region for more information about mortgages or support for buying a home.
Real Estate
Question: In 2020 I lost my job and went into bankruptcy. But now I am back on track and I would like to buy a house. Is it even possible to get a mortgage?
Yes, it is possible to get a mortgage after bankruptcy.
For a conventional mortgage, a lot depends on the type of bankruptcy. For Chapter 7 bankruptcy (you’ve sold your assets to discharge your debts as much as possible), typically, you have to wait four years, but it is possible that your situation could qualify as extenuating circumstances.
For Chapter 13 bankruptcy (you’ve completed your debt repayment plan), you generally need to wait two years from the discharge date. This period is shorter for FHA, VA, and USDA loans.
You’ll also need a 620 minimum credit score for a conventional loan, so keep your balances low on credit accounts and always pay on time. For FHA loans, a credit score of 580 is permissible, and your score could be as low as 500 if you have a 10 percent down payment.
You’ll need a cash down payment. With FHA loans, this could be as little as 3.5 percent.
Another type of loan can benefit people coming out of bankruptcy if they have cash on hand. The non-qualifying mortgage loan (non-QM) is suitable for people in special circumstances, typically self-employed people who don’t have pay stubs but do have a lot of cash and a high credit score. It can also benefit those with cash and a high credit score but a recent bankruptcy.
In 2022, here were the characteristics of the typical non-QM loan:
* Average credit score was 771
* Average down payment 24 percent
* Average Debt-to-Income (DTI) ratio was 37 percent
You generally need a DTI of 43 percent or less to finance a house. A good DTI is about 35 percent or less. You calculate DTI very simply: Monthly debt payments divided by gross income. Add up all the payments you make in a month, including student loans and child support, but don’t include utilities, groceries, and gas.
Real Estate
House selling: should you ever disclose the details of a competing offer?
If you’re selling your home and have several interested buyers, find out if disclosing the amount of a competing offer could help you get the best price.
Who can disclose this information?
Depending on your state, your real estate broker may not be allowed to tell other buyers the amount of a competing offer. However, they can disclose how many other offers are on the table.
If you’re selling your home privately, the decision is yours. You can either tell potential buyers what others have offered or keep this information to yourself.
Why should you share this information?
If you choose to share these figures, you may want to do so after shortlisting the best bids to see if any buyers wish to increase their offer. You could also remain open throughout the entire process and provide this information upfront to anyone interested in putting in an offer.
The first option may allow you to sell your home well above the asking price. The second option may reduce the number of potential buyers but increase the competitiveness of their offers.
Whatever you decide, consulting a professional will help make your sale successful.
Real Estate
Good news for buyers as home prices cool
The red-hot real estate market is slowly cooling as sellers in big markets lower their prices, according to brokerage firms.
Notable in the market are urban areas in California and Utah, where prices were often set unrealistically high, Redfin reports. The highest number of price drops on homes occurred in July in Boise, Idaho, where sellers lowered prices on 70 percent of homes for sale. In Salt Lake City, 56 percent of sellers lowered their prices in July. In fact, more than 15 percent of home sellers dropped their prices in July throughout all metro areas.
This trend may well affect areas throughout the country.
Rising interest rates have cooled expectations across the board. Rates that remained under 4 percent since 2019 are rising to about 5 to 6 percent. As buyers become a little less available, this should mean that the supply of houses on the market will rise.
Sellers should expect to see their homes on the market for 30 days or more, and they should price their homes in line with the market from the start. Some sellers showed unrealistic expectations about what prices their homes would fetch, Redfin says. Part of that problem was the seller grapevine, with people listening to the prices neighbors were getting on their homes and trying to win big themselves.
For now, even with higher interest rates, buyers should begin to have more choices and better prices.
Real Estate
Should you buy an existing home or build new?
Do you want to become a homeowner but can’t decide if buying an existing home or building a new one is the best option? Here are a few things to consider.
New home
The cost of building a home can quickly escalate when choosing the finishings. Keep in mind that you must also pay taxes on the value of the purchase. However, you can be sure you’ll move into a home that suits your tastes.
Additionally, building a new home requires you to be involved in the entire process, mainly because you must make various decisions and supervise the construction. Delays can also sometimes push back your move-in date.
Finally, although you may have more land options in a developing area, remember to ask about future road and service developments to avoid unpleasant surprises in a few years.
Existing home
When you buy an existing home, you generally get what you see. However, you may have to factor in renovation costs for things like new windows and updated plumbing. You may also have to set aside your style preferences and visualize the property’s potential during viewings.
The amount of time you invest in buying an existing home depends on how many properties you visit and the extent of the renovations you want to make.
In addition, buying an existing property gives you the advantage of starting out in an already well-developed neighborhood. However, this may limit your options.
Once you’ve decided, contact a real estate broker or developer to make your project a reality.
Real Estate
The pros and cons of refinancing your mortgage
Many homeowners refinance their mortgages to free up extra cash for large projects. However, before making this decision, you must understand the implications. Here’s a look at the advantages and disadvantages of mortgage refinancing.
The advantages
Mortgage refinancing allows you to borrow large sums of money at a lower interest rate than most personal loans and credit cards. This type of financing is beneficial for urgent and costly home repairs like fixing a leaky roof or unstable foundation. The money can also be used to buy a car or contribute to a retirement savings plan. Additionally, many people refinance their mortgages to help consolidate their debts and pay less interest.
The disadvantages
You must keep in mind that the money obtained through mortgage refinancing is debt that’s secured against your home. Therefore, if you run into major financial problems, you may find yourself without a home. While your lender might not mind if you borrow $50,000 against your home to pay for a trip around the world, you must ask yourself if it’s worth the risk. It’s also important to ask your creditor about extra costs associated with refinancing.
Talk to a local mortgage broker to make an informed decision.
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