Renters wanting to buy a home have been squeezed by raising rents, high housing prices, and costly mortgages. However, a shift in the housing market and creative bargaining offer hope for first-time home buyers.
According to a Fannie Mae survey, over sixty percent of renters would buy a home if their lease ended this month.
Rents Rise
Rental rates usually slow in the fall and winter, according to a report from Realtor.com. That held true in 2022 as rents increased an average of 4.7 percent year-over-year in October. However, a year ago this month, rates jumped 17.4 percent.
As a result, the report notes, most renters have already experienced rent hikes.
“Three out of four renters (74.2%) who have moved in the past 12 months reported seeing their rent increase,” Realtor.com found.
In addition, the report says, “Nearly two-thirds of renters (63.2%) who have lived in their current rental between 12 and 24 months, and likely renewed their lease, have also reported increases in their rent.”
Of those who have experienced a rent increase, 69.5 percent are considering a move to save money. Although that may not work out.
“Renters looking for more affordability by moving may struggle to find it, however,” notes Realtor.com. “Those who moved in the past 12 months reported a median rent increase of $300 per month.”
Housing Market Shifting
As rents rise, home prices have stabilized. Meanwhile, sales have consistently declined over the last year.
Existing home sales dropped 7.7 percent from October to November, according to the National Association of Realtors. That was the 10th consecutive monthly decline. It also marked a 35.4 percent decrease from the previous November.
The decline in sales may have kept some sellers on the sidelines. However, according to real estate brokerage Redfin, the number of homes for sale rose 18 percent in December. That is the greatest increase since 2015.
During the same period, new listings were down. As a result, Redfin reports that the increase in homes on the market is due to the fact that they are taking more time to sell.
Creative Bargaining
With sales slowing, many home sellers are offering concessions.
According to Redfin, 41.9 percent of sellers offered concessions to buyers.
“People can always negotiate,” says Ben Herrera, a loan officer with Flagstar Bank. “From sales price to concessions, we’re definitely seeing more of that.”
Seller concessions could include money for repairs, closing costs, and/or mortgage-rate buy-downs.
“Buyers are asking sellers for things that were unheard of during the past few years,” said Van Welborn, a Redfin agent in Phoenix. “They’re feeling empowered, partly because their offer is often the only one, and partly because they know sellers have built up so much equity during the pandemic that they can afford to dole out sizable concessions.”
Mortgage Rates
One thing that can not be negotiated long-term is mortgage rates. Some companies offer plans that lower interest rates for the first two years. After that, the rate returns to the current figure. However, those mortgages require more upfront money in escrow.
“There are government plans where first-time buyers get a lower interest rate but, other than that the rate is the rate,” says Herrera. “And rates have been really volatile. I’ve been a loan officer for 10 years and I’ve never seen anything like it.”
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