Pre-Approval in 2023: What You Need To Know

One of the first steps in your homebuying journey is getting pre-approved. To understand why it’s such an important step, you need to understand what pre-approval is and what it does for you. Business Insider explains:“In a preapproval [sic], the lender tells you which types of loans you may be eligible to take out, how much you may be approved to borrow, and what your rate could be.”Basically, pre-approval gives you critical information about the homebuying process that’ll help you understand your options and what you may be able to borrow.How does it work? As part of the pre-approval process, a lender will look at your finances to determine what they’d be willing to loan you. From there, your lender will give you a pre-approval letter to help you understand how much money you can borrow. That can make it easier when you set out to search for homes because you’ll know your overall numbers. And with higher mortgage rates impacting affordability for many buyers today, a solid understanding of your numbers is even more important.Pre-Approval Helps Show You’re a Serious BuyerAnother added benefit is pre-approval can help a seller feel more confident in your offer because it shows you’re serious about buying their house. A recent article from Forbes notes:“From the seller’s perspective, a preapproval [sic] letter from a reputable local lender often can make the difference between accepting and rejecting an offer.”This goes to show, even though you may not face the intense bidding wars you saw if you tried to buy during the pandemic, pre-approval is still an important part of making a strong offer. In fact, Christy Bieber, Personal Finance Writer at The Motley Fool explains it may be the most important part of making an offer:“Pre-approval maximizes the chances you’ll be able to actually close the deal – and sellers want to see that.The fact that a pre-approval gives you a better chance of getting your offer accepted is undoubtedly the most important reason to complete this step . . .”Bottom LineGetting pre-approved is an important first step towards buying a home. It lets you know what you can borrow and shows sellers you’re serious about purchasing their home. Connect with a local real estate professional and a trusted lender so you have the tools you need to purchase a home in today’s market.

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Think Twice Before Waiting for 3% Mortgage Rates

Last year, the Federal Reserve took action to try to bring down inflation. In response to those efforts, mortgage rates jumped up rapidly from the record lows we saw in 2021, peaking at just over 7% last October. Hopeful buyers experienced a hit to their purchasing power as a result, and some decided to press pause on their plans.   Today, the rate of inflation is starting to drop. And as a result, mortgage rates have dipped below last year’s peak. Sam Khater, Chief Economist at Freddie Mac, shares: “While mortgage market activity has significantly shrunk over the last year, inflationary pressures are easing and should lead to lower mortgage rates in 2023.” That’s potentially great news if you’re a buyer aiming to jump back into the San Antonio housing market. Any drop in mortgage rates helps boost your purchasing power by bringing down your expected monthly mortgage payment. This means the lower mortgage rates experts forecast this year could be just what you need to reignite your homebuying goals.   While this opens up a window of opportunity for you, remember: you shouldn’t expect rates to drop back down to record lows like we saw in 2021. Experts agree that’s not the range buyers should bank on. Greg McBride, Chief Financial Analyst at Bankrate, explains: “I think we could be surprised at how much mortgage rates pull back this year. But we’re not going back to 3 percent anytime soon, because inflation is not going back to 2 percent anytime soon.” It’s important to have a realistic vision for what you can expect this year, and that’s where the advice of expert real estate advisors is critical. You may be surprised by the impact even a mild drop in mortgage rates has on your budget. If you’re ready to buy a home in San Antonio now, today’s market presents the opportunity to get a more affordable mortgage rate, find your dream home, and face less competition from other buyers. Bottom Line The recent pullback in mortgage rates is great news – but if you’re ready to buy now, holding out for 3% is a mistake. Work with a local lender to learn how today’s rates impact your goals, and let’s connect to explore your options in our area.       What To Expect From the Housing Market in 2023 The 2022 housing market has been defined by two key things: inflation and rapidly rising mortgage rates. And in many ways, it's put the market into a reset position. As the Federal Reserve (the Fed) made moves this year to try to lower inflation, mortgage rates more than doubled – something that’s never happened before in a calendar year. This had a cascading impact on buyer activity, the balance between supply and demand, and ultimately home prices. And as all those things changed, some buyers and sellers put their plans on hold and decided to wait until the market felt a bit more predictable. But what does that mean for next year? What everyone really wants is more stability in the market in 2023. For that to happen we’ll need to see the Fed bring inflation down even more and keep it there. Here’s what housing market experts say we can expect next year. What’s Ahead for Mortgage Rates in 2023? Moving forward, experts agree it’s still going to be all about inflation. If inflation is high, mortgage rates will be as well. But if inflation continues to fall, mortgage rates will likely respond. While there may be early signs inflation is easing as we round out this year, we’re not out of the woods just yet. Inflation is still something to watch in 2023. Right now, experts are factoring all of this into their mortgage rate forecasts for next year. And if we average those forecasts together, experts say we can expect rates to stabilize a bit more in 2023. Whether that’s between 5.5% and 6.5%, it’s hard for experts to say exactly where they’ll land. But based on the average of their projections, a more predictable rate is likely ahead (see chart below): That means, we’ll start the year out about where we are right now. But we could see rates tick down if inflation continues to drop. As Greg McBride, Chief Financial Analyst at Bankrate, explains: “. . . mortgage rates could pull back meaningfully next year if inflation pressures ease.” In the meantime, expect some volatility as rates will likely fluctuate in the weeks ahead. If we see inflation come back under control, that would be good news for the housing market. What Will Happen to Home Prices Next Year? Homes prices will always be defined by supply and demand. The more buyers and fewer homes there are on the market, the more home prices will rise. And that’s exactly what we saw during the pandemic. But this year, things changed. We’ve seen home prices moderate and housing supply grow as buyer demand pulled back due to higher mortgage rates. The level of moderation has varied by local area – with the biggest changes happening in overheated markets. But do experts think that will continue? The graph below shows the latest home price forecasts for 2023. As the different colored bars indicate, some experts are saying home prices will appreciate next year, and others are saying home prices will come down. But again, if we take the average of all the forecasts (shown in green), we can get a feel for what 2023 may hold. The truth is probably somewhere in the middle. That means nationally, we’ll likely see relatively flat or neutral appreciation in 2023. As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says: “After a big boom over the past two years, there will essentially be no change nationally . . . Half of the country may experience small price gains, while the other half may see slight price declines.” Bottom Line The 2023 housing market is going to be defined by mortgage rates, and rates will be determined by what happens with inflation. The best way to keep a pulse on what experts are projecting for next year is to lean on a trusted real estate advisor. Let’s connect.     Have Home Values Hit Bottom? Whether you’re already a homeowner or you’re looking to become one, the recent headlines about home prices may leave you with more questions than answers. News stories are talking about home prices falling, and that’s raising concerns about a repeat of what happened to prices in the crash in 2008. One of the questions that’s on many minds, based on those headlines, is: how much will home prices decline? But what you may not realize is expert forecasters aren’t calling for a free fall in prices. In fact, if you look at the latest data, there’s a case to be made that the biggest portion of month-over-month price depreciation nationally may already behind us – and even those numbers weren’t significant declines on the national level. Instead of how far will they drop, the question becomes: have home values hit bottom? Let’s take a look at the latest data from several reputable industry sources (see chart below): The chart above provides a look at the most recent reports from Case-Shiller, the Federal Housing Finance Agency (FHFA), Black Knight, and CoreLogic. It shows how, on a national scale, home values have changed month-over-month since January 2022. November and December numbers have yet to come out. Let’s focus in on what the red numbers tell us. The red numbers are the change in home values over the last four months that have been published. And if we isolate the last four months, what the data shows is, in each case, home price depreciation peaked in August. While that doesn’t guarantee home price depreciation has hit bottom, it confirms prices aren’t in a free fall, and it may be an early signal that the worst is already behind us. As the numbers for November and December are released, data will be able to further validate this national trend. Bottom Line Home prices month-over-month have depreciated for the past four months on record, but there’s a strong case to be made that the worst may be behind us. If you have questions about what’s happening with home prices in our local market, let’s connect.       Avoid the Rental Trap in 2023 If you’re a renter, you likely face an important decision every year: renew your current lease, start a new one, or buy a home. This year is no different. But before you dive too deeply into your options, it helps to understand the true costs of renting moving forward. In the past year, both current renters and new renters have seen their rent go up based on information from realtor.com: “Three out of four renters (74.2%) who have moved in the past 12 months reported seeing their rent increase. The strain from recent rent hikes isn’t exclusive to renters who have recently moved. 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.” And if you look back at historical data, that shouldn’t come as surprise. That’s because, according to the Census, rents have been rising fairly consistently since 1988 (see graph below): So, if you’re considering renting as an option in 2023, it’s worth weighing whether this trend is likely to continue. The 2023 Housing Forecast from realtor.com expects rents will keep climbing (see graph below): That forecast projects rents will increase by 6.3% in the year ahead (shown in green). When compared to the blue bars in the graph, it’s clear that the 2023 projection doesn’t call for an increase as drastic as the ones renters have seen over the past two years, but it’s still above the historical average for rent hikes between 2013-2019. That means, if you’re planning to rent again this year and you’ve not yet renewed your lease, you may pay more when you do. Homeownership Provides an Alternative to Rising Rents These rising costs may make you reconsider what other alternatives you have. If you're looking for more stability, it could be time to prioritize homeownership. One of the many benefits of owning your own home is it provides a stable monthly cost that you can lock in for the duration of your loan. As Freddie Mac says: “Monthly rent payments may increase over time, but a fixed-rate mortgage will ensure that you're paying the same amount each month. With a fixed-rate mortgage, your interest rate is locked in for the life of loan. Steady payments allow you to budget wisely and make plans for the future.” If you’re planning to make a move this year, locking in your monthly housing costs for the duration of your loan can be a major benefit. You’ll avoid wondering if you’ll need to adjust your budget to account for annual increases like you would if you left your housing payment up to your landlord and their renewal cycle. Homeowners also enjoy the added benefit of home equity, which has grown substantially. In fact, the latest Homeowner Equity Insight report from CoreLogic shows the average homeowner gained $34,300 in equity over the last 12 months. As a renter, your rent payment only covers the cost of your dwelling. When you pay your mortgage on a house, you grow your wealth through the forced savings that is your home equity. Bottom Line If you’re thinking of renting this year, it’s important to keep in mind the true costs you’ll face. Let’s chat to see how you can begin your journey to homeownership today.

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Key Terms To Know When Buying a Home [INFOGRAPHIC]

Some Highlights Buying a home is a major transaction that can seem even more complex when you don’t understand the terms used throughout the process. If you’re looking to become a homeowner this year, it’s important to know these housing terms and how they relate to the current market so you feel confident throughout the homebuying process. Let’s connect so you have expert answers for any questions as they come up.

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