5 Trends to Watch in the Spring 2019 Homebuying Season
If you’re still waking up to freezing temperatures, it may not feel like winter is in the rearview. But as far as the calendar is concerned, spring is here, and that brings the hustle and bustle of the spring homebuying season.
As of late, both housing inventory and mortgage applications have been on the rise while mortgage rates have been cooling down, helping make homes more affordable for homebuyers.
If you’re planning to jump into the housing market this spring, there are several emerging trends you might want to keep in mind as you start the process. Below we highlight and explain 5 homebuying trends that should be on your radar this season.
Higher mortgage interest rates
Mortgage interest rates have been taking a breather over the last couple of months. During the first week in January 2019, the average 30-year fixed-rate mortgage was 4.51%, according to data from Freddie Mac’s Primary Mortgage Market Survey.
As of March 28, the 30-year fixed took a nosedive to 4.06% — a 22-basis-point decline from the week prior — and represents the largest one-week drop in more than a decade.
This opens up a window for refinancing this spring. But still, mortgage rates are predicted to climb moving forward. Freddie Mac forecasts that mortgage rates will average 4.5% while Fannie Mae expects a 4.4% average.
When you’re ready to shop for a mortgage, keep in mind that there are several factors that help determine your interest rate, including your:
- Credit score
- Down payment amount
- Interest rate structure, i.e. adjustable or fixed
- Loan amount
- Mortgage term length
- Mortgage type
Shopping around for the best mortgage rate available can help you save thousands over the life your loan. You could possibly reduce your interest costs by more than $38,000 on a $300,000 loan, according to LendingTree’s Mortgage Rate Competition Index.
Slower home price growth
While home prices are expected to continue their upward trajectory, we likely won’t see the same home price growth of years’ past. CoreLogic’s latest Home Price Index shows that national home prices have increased 4.4% year over year from January 2018 to January 2019, which is a significantly slower pace than the 6.1% growth year over year from 2017 to 2018.
Additional data underscore the slowdown in home price growth. The median price for existing homes was $249,500 in February 2019, the most recent month for which data is available, according to the National Association of Realtors (NAR). This is just a 3.6% increase from February 2018, when the median price was $240,800.
Fannie Mae predicts 4.4% price growth this spring, which is notably lower than the 6.8% growth from seen during the second quarter of 2018.
The drop-off in home price appreciation could ultimately help improve home affordability for homebuyers and increase their buying power. On the seller side, the bump up in home prices might not be as high as previous quarters, but it’s still growth that can provide a boost to home values and equity.
Limited housing inventory
Housing inventory has consistently been on the lower end for the past several years, hovering around a four-month supply, according to NAR data. Simply put, the demand for houses has been far outpacing the number of available homes for sale, which continues to favor home sellers, as there’s a higher chance of having multiple bids above asking price for the same house.
As it stands currently, at 3.5 months, housing inventory still benefits home sellers more than it does buyers. Whenever there is at least six months’ worth of housing supply, it represents an balanced market for both sides, according to the NAR.
However, there has been an uptick in the supply of homes for sale recently, which — when coupled with the latest decline in mortgage rates — has encouraged more buying activity.
“Homebuyers are now returning and taking advantage of lower interest rates, while a boost in inventory is also providing more choices for consumers,” Lawrence Yun, NAR’s chief economist, said in a statement.
Even still, inventory is a concern for the spring homebuying season.
“I really am, not overly, but concerned that we’re going to run out of inventory again,” said Pava Leyrer, chief operating officer at Northern Mortgage Services in Grandville, Mich.
Leyrer said there’s a trend of houses being on the market a bit longer these days, but that’s not necessarily the case locally.
“I guess our market is still seeing [a] — not as bad — but a tightened homebuyer market,” she said.
Buyers want a laundry room and walk-in pantry
The vast majority of consumers buying a home in 2019 — 91% of homebuyers, to be exact — want a laundry room in their home, according to a survey of prospective and recent homebuyers conducted by the National Association of Home Builders (NAHB). For 54% of those buyers, a laundry room is a must-have; the remaining 37% say it’s a desirable feature.
Rounding out the top five most-wanted features are:
- Energy Star-rated windows: 89%
- Patio: 87%
- Energy Star-rated appliances: 86%
- Ceiling fan: 85%
Specifically in the kitchen space, the most-wanted feature is a walk-in pantry, according to the NAHB. A total 83% of survey respondents reported that a walk-in pantry is either a must-have or desirable. The next four most-wanted features include:
- Double sink side-by-side: 81%
- Table space for eating: 78%
- Central island: 76%
- Granite/natural stone countertop: 75%
More relaxed credit requirements
Your credit score not only determines whether you’re eligible to get a mortgage, it also helps determine what your mortgage interest rate will be. Generally speaking, you should expect to meet the following credit score requirements, depending on which mortgage program you’re pursuing:
- Conventional loan: 620
- FHA loan: 580
- USDA loan: 640
- VA loan: 620
Still, you’ll want to boost your chances of mortgage approval even further by improving your score to exceed the minimum.
Credit standards are loosening, however, especially for non-bank lenders. The median FICO score for non-bank lenders is 715, while the median for banks is 745, according to the Urban Institute’s Housing Finance Policy Center. The difference in scores is driven by banks moving away from FHA mortgages. A year ago, the median FICO scores for bank and non-bank lenders were 747 and 716, respectively.
The bottom line
When compared to last year, 2019 is looking more favorable for homebuyers. Mortgage rates have taken an extended break from climbing toward 5%. Just a few months ago in mid-November 2018, the average 30-year fixed-rate mortgage was 4.94%; a year-ago in late March, the average 30-year fixed was 4.44%. Additionally, home price growth continues to trickle downward as each quarter passes. Both of these factors contribute to more buying power.
What’s more or less the same trend of spring homebuying seasons’ past is the fact that buyers still have to contend with competition due to a limited supply of homes for sale.
Although there are some changes surfacing in what is influencing the housing market, the homebuying rules of thumb still apply.
You’ll want to prepare as much as possible before you apply for a mortgage, which includes successfully managing and paying down your existing debt, maintaining on-time payments and removing any errors from your credit reports. Additionally, beef up your savings, as you not only need down payment funds but also money for closing costs, maintenance and other related expenses.
Lastly, be sure you get a mortgage preapproval before your house hunt. A preapproval gives you a more accurate estimate of the home price you can reasonably afford and it helps home sellers take you more seriously as a buyer.