Signs That the Housing Market Is On Its Way to Stabilization

If you’ve ever braved the Black Friday shopping crowds, you know what a mob scene it can become.  A limited supply of “hot” items + hordes of eager shoppers = A feeding frenzy.

Now, apply that same image to homebuying, and you’ll get a sense of the housing market for much of the past year. The coronavirus pandemic triggered a shopping spree, with many buyers purchasing properties sight unseen and others engaging in competitive bidding wars.

But the current state of affairs? Let’s take a closer look at housing and what it means for prospective homebuyers.

Home listings are up

One of the biggest sources of frustration for homebuyers in 2020 (and into 2021) was simply finding a property to purchase.

According to Realtor.com’s July 2021 Monthly Housing Market Trends Report, the number of active listings was down 33.5% year over year. In other words, there just haven’t been enough homes to go around.

But there’s a silver lining. The number of newly listed homes on the market increased by 6.5% in July. In larger metro areas, new listings were up 11.1%. More listings mean more opportunities for shoppers to find the right home (and likely fewer bidding wars).

The numbers aren’t huge compared to previous years, but they do suggest that the housing market is beginning to regain some of its equilibrium.

Mortgage rates are still near historic lows

Mortgage rates took a steep dive in 2020, with 30-year fixed rate loans hitting 2.67% at the end of December. That led to a homebuying surge, as well as an increase in mortgage refinancing activity among existing homeowners.

Rates increased in the early part of 2021, but they’re again hovering near historic lows. Through the first week of September, the 30-year fixed rate mortgage rate was at 2.88%.

That’s a boon if you’re hoping to enter the market now as shortages in home inventories begin to ease. Lower mortgage rates can mean less money spent on interest charges over the lifetime of your loan.

Mortgage rates can also influence home affordability. When rates are low, buyers may be able to get more home for their money. If you haven’t crunched the numbers yet, doing the math with a home affordability calculator like ours can help with setting your home buying budget.

Home prices are still up

One trend that hasn’t reversed course yet with housing is home prices. According to Realtor.com’s data, the median listing price for active listings was $385,000 in July. That’s an increase of 10.3% over home prices for July 2020.

Higher home prices are often the result of an imbalance in supply and demand. A seller’s market happens when there are more buyers than homes. Sellers can charge higher prices for properties as long as there are buyers willing to pay them.

That could change, as more home listings make it onto the market. Median home prices may soon reach their peak if they haven’t already. And that’s another positive sign for buyers who are hoping to get into the market now.

Is now a good time to buy a home?

Purchasing a home can be a great way to build generational wealth. But it is a major investment, so it’s important to look at what’s happening with the housing market.

Currently, a steadily increasing supply and low interest rates are working in favor of home buyers. As more homes hit the market, prices may begin to stabilize. If you’re ready to make a purchase, you can get a deal on a mortgage by taking advantage of the historically low interest rates. But choosing the right lender is the first step. With Ally Home, you can choose between fixed-rate, adjustable rate and jumbo loans. We’ve eliminated our lender fees for new home loan applications, making homebuying even more affordable.

Keep in mind: Rates won’t remain low forever. If the Federal Reserve decides to raise the federal funds rate at some point, mortgage rates could start to climb once again.

If you’re on the fence about whether to buy or stick with renting, it also helps to consider rent pricing trends. Rent prices for one- and two-bedroom units have risen steadily over the past year and with inflation picking up, that trend could continue. Estimate your mortgage costs to see if you can save by buying versus renting. You might also want to explore a rent-to-own home.

Also, consider how much you can save toward your down payment and closing costs. With a HomeReady mortgage that’s available through various lenders, including Ally Home, you may only need 3% of the purchase price as a down payment. But with a conventional loan, you’ll need 20% down to avoid paying private mortgage insurance. Closing costs can add another 2% to 5% to your home buying total.

Keep calm and shop on

You may not have to deal with Black Friday conditions when home shopping, but it’s still an active marketplace. So do your best to avoid the frenzy and make a decision that takes the current situation into consideration, but also your homebuying budget.

Simplify the buying process with Ally Home.

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