The summer sales wave has crested and not in July as we had expected. Turns out, June was this year’s high water mark. Not surprising, but it’s certainly off from previous years where July has been the monster month for home buying. We’re now seeing sales trailing off in most areas, while inventory levels are still quite high for this late in the summer. Since everyone goes on vacation in August and leaves behind lots of homes for sale to sit in the heat, we expect prices will likely come down through the fall. This is good news if you are looking to buy and bad news if you are trying to sell.
To see what’s happening in the areas where you’re looking at homes, just download our big spreadsheet full of numbers at the city, zip code and neighborhood level. In lieu of all the data tables this month, we decided to spend a little time focusing on everything that’s happening in the economy and what it means for you.
Navigate the Wall Street Craziness With a Great Mortgage Broker
The stock market’s wild ride is likely to have an effect on home buyers’ purchasing power, as many buyers have their down payment funds tied up in the financial markets. That certainly means the 20% you thought you had last Friday is now less than that today. We have already heard from clients who have had to change their plans because of this loss of value. “We see some of our clients pulling back from their search as the market tries to sort itself out” says Nancy Roos, leader of Redfin’s Lexington area team. “A couple I was recently working with saw the gift funds they were going to receive from a parent lose a significant part of its value and therefore disappear for their purchase. People don’t want to take a loss right now when the possibility of the stock market returning does exist”. Now you don’t lose until you sell, but with an impending purchase that option becomes unavoidable.
Our advice: If you’re in the process or just beginning, make sure to speak with your mortgage broker about getting your loan approved or getting yourself pre-approved for the next move, especially if your finances have changed from this downturn.
Fed to Keep Mortgage Rates Low
The only slightly more shocking occurrence is the Fed stating that they are going to hold rates low until at least 2013. This could be positive news for obtaining a mortgage at a historical rate, but may also mean a lot of home owners may want to refinance to take advantage of low rates, which always gum up new home purchase processes, even though the banks always claim new home purchases take precedence.
- Find a local mortgage broker: do your research and work with someone with a solid record of service, especially as rates jump around wildly with the unstable economy. Most importantly, choose a local broker practicing in MA who understands the process. We’ve seen out of state lenders promising our clients low rates, but then the loan falls apart because they don’t understand the nuances of the MA loan process. “Every time I have had a nightmare situation around obtaining a commitment letter and therefore an approved loan, it has almost always been with an out of state lender,” says Hannah Driscoll, team lead for the Metro Boston area. “I often tell people, whether you use Redfin or not, please take my advice on out of state lenders; the small amount of savings they promise, even if they do follow through with it, will make your purchase 10 times as stressful and prone to failure than a proven local lender”. Service is the most important part of the equation so make your decision based on the success rate, recommendations and the service commitment of your lender. Make sure you like your lender before committing as you won’t be able to change at the last minute and get a loan approved in a shortened amount of time.
- Use proven funds: as you shop around for mortgage rates, make sure to use funds that are not locked up in an unstable market. If you are ready to make the move, sell soon and hold in your checking account. Sounds painful but drastic swings in your assets will affect your ability to secure financing.
- Stay involved: once your offer on a home is accepted, stay very involved with your loan officer during the approval process and make sure that the appraisal happens as soon as possible. Don’t take anything for granted and assume nothing. If you’re a buyer, you’ll need to provide various documents throughout the loan approval process, so stay connected via email and phone in the week leading up to your loan approval to make sure all the ducks are in a row for your loan to go through smoothly.
Feel free to reach out to me or any Redfin Boston agent or partner lender with questions about your own situation. We’re happy to help in any way. You can also leave a comment about your take on the market below.
Enjoy the rest of summer!
Alex Coon, Boston Market Manager