Unstable borrowing conditions and a lack of affordable properties kept homeownership out of reach for many Americans in 2023. However, as the spring buying season approaches and signs that the market is recovering emerge, buyer sentiment is shifting. According to the National Association of Realtors®, national existing home sales in January 2024 were up year-over-year by 1.3%. Housing supply is also improving, with national inventory up by 3.1% year-over-year and 2% month-over-month.
These positive changes are setting the stage for an active spring market in the US. But as competition increases, so do home prices. The national median price for a single-family home in the US increased by 5.1% year-over-year in January to $379,100. This begs the question: where can prospective homebuyers find the best deals this spring?
To better understand where homebuyers can find pockets of affordability, Zoocasa analyzed home prices in 50 metropolitan statistical areas across the country to determine which are below the national median and where the most growth is happening. Median single-family home prices were sourced from the National Association of REALTORS® and are from Q4 2023, except the national median home price which is from January 2024.
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It’s usually said that the further outside of an urban center you go, the more affordable the home price. But of the 33 metropolitan statistical areas with a median home price below the national median, 15 have populations above 2 million, and five have populations above 5 million. The largest urban center with a median home price below the national median is Chicago, IL with a median home price of $343,300 in Q4 of 2023. Despite the city experiencing year-over-year price growth of 6.2%, Chicago’s median home price is still $35,800 below the national median.
Of the 50 markets we analyzed, Cleveland, OH came out on top for affordability. Cleveland’s median home price of $190,700 is an impressive $188,400 below the national median and is one of the few areas on our list where the median home price dropped from last year. Other markets where the median home price fell from last year include Myrtle Beach, SC, Houston, TX, San Antonio, TX, and Memphis, TN. Alabama’s capital, Montgomery, was the only other market on our list besides Cleveland with a median home price below $200,000. Homebuyers here can snag a home for approximately $185,700 below the national median.
It’s worth noting that five out of the six markets that experienced year-over-year price growth of more than 9% have home prices below the national median. These markets include Rochester, NY, Hartford, CT, New Haven, CT, Oklahoma City, OK, and Cincinnati, OH. This means that homebuyers of all price ranges, including those purchasing lower-priced homes, can still expect to build a significant amount of equity.
Markets that have experienced significant year-over-year price growth also present good investment opportunities. For instance, single-family homes in Philadelphia, PA have experienced year-over-year price growth of 7.2% and are still $20,100 below the national median price, making this sought-after city a good option for first-time investors. Kansas City, MO is an emerging market that would make a great first-time investment location. The city garnered a lot of media attention last year thanks to the city’s football team and frequent Taylor Swift visits, resulting in the median home price rising by 5.9% year-over-year. Despite its growing popularity, the median home price in Kansas City remains one of the lowest on our list at $315,800.
Homebuyers with their hearts set on a particular destination, especially one of the largest and most sought-after cities in the US, would benefit from considering smaller markets relatively close to their dream location. While the Big Apple might be out of reach for the average buyer, with a median home price of $659,200, New York’s second and third-largest cities still maintain affordable prices. Buffalo and Rochester have median home prices of $243,500 and $230,500 respectively. This is nearly $150,000 less than the national median, compared to New York City, where the median home price is more than $280,000 above the national median.
Though San Francisco, CA, and Los Angeles, CA have notoriously high home prices, at $1,251,000 and $884,400 respectively, California homebuyers still have affordable options. At just $26,600 above the national median, Fresno’s median home price is one of the more affordable options in California. But for savvy buyers looking for a deal in California, Bakersfield presents the best option with a median home price of $11,800 below the national median.
In Florida, motivated buyers on the hunt for affordable prices will have to look outside of the vibrant Miami market, which has a median home price more than $200,000 above the national median. Tampa’s median home price exceeds the national median by just $30,900, while Daytona Beach and Tallahassee offer more affordable housing, with median prices $16,700 and $57,100 below the national median, respectively.
Planning to enter one of these markets this spring? It’s important to speak with a local realtor who is familiar with your local real estate market. Give us a call today to discuss your home-buying plans.
Amid a housing shortage and an affordability crisis, US homebuilding heated up in February as builders anticipate demand for new homes to stay strong.
One sure way to improve affordability is to increase the availability of apartments to rent and homes to buy. In areas of the country where there has been robust homebuilding, rents and home price increases have been more moderate.
The pace of new housing starts soared by 10.7% in February from the month before, after slumping in January, according to data released Thursday by the Census Bureau and the Department of Housing and Urban Development.
Starts rose to a seasonally adjusted annual rate of 1.521 million units last month, beating analysts’ estimates of 1.425 million. The pace rebounded from January’s revised pace of 1.374 million and was 5.9% above the 1.436 million pace a year ago.
Meanwhile, the pace of new building permits was up 1.9% from January, which was up 2.4% from a year ago.
Homebuyers look to new construction for much-needed inventory
While the number of existing homes on the market remains historically low, new construction has provided a critical alternative for homebuyers.
Mortgage applications for a newly constructed home were up a whopping 15.7% in February from a year ago, according to the Mortgage Bankers Association; and up by 1% from January. The average loan size jumped to its highest level since last March at almost $406,000, but it was still below the record high of more than $436,000 in April 2022.
“It is possible that we could see more wiggle room on pricing in the coming months, as the inventory of existing homes begins to expand,” said Lisa Sturtevant, chief economist at Bright Multiple Listing Service, in a statement.
Prospective homebuyers who are looking at new construction are still finding some builders offering concessions, upgrades, or favorable financing terms, she said.
But, according to the NAHB, fewer builders are offering price cuts.
Homebuilders are preparing for when rates are lower
The much lower mortgage rates that many homebuyers expected have yet to materialize, but builders want to be ready for when that does happen.
Mortgage rates have come down from their highest levels of last year — 7.79% in October — and are now about a full percentage point below that, at 6.74%.
“Lower mortgage rates are likely to bring buyers to the market in larger numbers, and builders are ramping up supply to meet this demand,” said Kelly Mangold of RCLCO Real Estate Consulting, in a statement.
While existing home inventory has ticked up lately, as is typical this time of year, there is still a historically low number of homes on the market as owners see the gap between their ultra-low rate and prevailing rates as still too wide.
That creates an opportunity for homebuilders who can provide inventory.
“Homebuilders continue to be bullish about the spring market as homeowners are still reluctant to list their homes for sale and new homes account for an outsized share of the active inventory,” said Sturtevant.
Homebuilder confidence improved this month even as mortgage rates climbed, according to a survey from the National Association of Home Builders released Monday.
The lack of existing inventory that continues to push buyers toward new home construction led homebuilder sentiment index to the highest level since July and marked the fourth consecutive monthly gain for the index.
Addressing the housing shortage
Housing affordability amid high inflation and elevated interest rates remains a hot-button issue for the White House as well as the Federal Reserve.
President Joe Biden is set to address the housing shortage Tuesday in a speech from Las Vegas, where the cost of rent has increased 30% from before the pandemic and the cost to buy a home has risen by over 40% since then.
Biden is expected to call on Congress to pass legislation that he says could result in the building and renovation of more than 2 million homes to close the housing supply gap and lower housing costs.
Housing experts agree there are not enough homes available to rent or own compared to the demand. But the size of that gap ranges from a shortfall of 1.5 million units (according to National Association of Home Builders) to 5.5 million units (according to the National Association of Realtors) or as many as 7 million (according to the National Low Income Housing Coalition and Realtor.com), depending on who is calculating it and what assumptions about housing are being made.
Average mortgage rates climbed moderately last Friday. Indeed, they rose on every business day last week. However, that followed a week of mainly falls. And those rates begin this morning close to where they were at the start of March.
First thing, it was looking as if mortgage rates today barely move. But that could change later in the day.
Current mortgage and refinance rates
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Program
Mortgage Rate
APR*
Change
Conventional 30-year fixed
7.12%
7.13%
+0.02
Conventional 15-year fixed
6.62%
6.65%
+0.03
Conventional 20-year fixed
7.15%
7.17%
+0.04
Conventional 10-year fixed
6.64%
6.66%
Unchanged
30-year fixed FHA
6.49%
7.17%
+0.01
30-year fixed VA
6.61%
6.72%
+0.02
5/1 ARM Conventional
6.28%
7.38%
Unchanged
Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions See our rate assumptions here.
Should you lock your mortgage rate today?
I doubt we’ll see mortgage rates enter a consistent downward trend much before the summer, and possibly later.
So, for now, my personal rate lock recommendations remain:
LOCK if closing in 7 days
LOCK if closing in 15 days
LOCK if closing in 30 days
LOCK if closing in 45 days
LOCKif closing in 60days
However, with so much uncertainty at the moment, your instincts could easily turn out to be as good as mine — or better. So, let your gut and your own tolerance for risk help guide you.
>Related: 7 Tips to get the best refinance rate
Market data affecting today’s mortgage rates
Here’s a snapshot of the state of play this morning at about 9:50 a.m. (ET). The data are mostly compared with roughly the same time the business day before, so much of the movement will often have happened in the previous session. The numbers are:
The yield on 10-year Treasury notes held steady at 4.32%. (Neutral for mortgage rates. However, yields were rising this morning.) More than any other market, mortgage rates typically tend to follow these particular Treasury bond yields
Major stock indexes were rising this morning. (Bad for mortgage rates.) When investors buy shares, they’re often selling bonds, which pushes those prices down and increases yields and mortgage rates. The opposite may happen when indexes are lower. But this is an imperfect relationship
Oil prices increased to $81.35 from $80.62 a barrel. (Bad for mortgage rates*.) Energy prices play a prominent role in creating inflation and also point to future economic activity
Goldprices inched down to $2,159 from $2,162 an ounce. (Neutral for mortgage rates*.) It is generally better for rates when gold prices rise and worse when they fall. Because gold tends to rise when investors worry about the economy.
CNN Business Fear & Greed index — nudged up to 75 from 71 out of 100. (Bad for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So, lower readings are often better than higher ones
*A movement of less than $20 on gold prices or 40 cents on oil ones is a change of 1% or less. So we only count meaningful differences as good or bad for mortgage rates.
Caveats about markets and rates
Before the pandemic, post-pandemic upheavals, and war in Ukraine, you could look at the above figures and make a pretty good guess about what would happen to mortgage rates that day. But that’s no longer the case. We still make daily calls. And are usually right. But our record for accuracy won’t achieve its former high levels until things settle down.
So, use markets only as a rough guide. Because they have to be exceptionally strong or weak to rely on them. But, with that caveat, mortgage rates today look likely to hold close to steady. However, be aware that “intraday swings” (when rates change speed or direction during the day) are a common feature right now.
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What’s driving mortgage rates today?
The Fed
The Federal Reserve’s rate-setting body (the Federal Open Market Committee or FOMC) begins a two-day meeting tomorrow. And a flurry of events is scheduled for the following afternoon.
Almost nobody expects an announcement of a cut in general interest rates on Wednesday. But events that afternoon include:
2 p.m. Eastern — Rate announcement and report publications
2 p.m. Eastern — Summary of Economic Projects publication. This occurs only quarterly and includes a dot plot
These FOMC documents and the news conference may provide new insights into how the Fed’s thinking on future cuts to general interest rates is evolving. So, markets globally will be paying the closest attention to every word written and uttered.
And there is huge potential for Wednesday’s Fed events to move mortgage rates.
I covered this in last Saturday’s weekend edition. And I’ll brief you in more detail again on Wednesday morning so you’ll know what to look out for.
Other influences on mortgage rates this week
Most of the economic reports on this week’s calendar are unlikely to affect mortgage rates. It’s not impossible. But they cover areas of the economy that rarely interest the bond investors who largely determine those rates.
Today’s lone report is a good example. It’s the home builder confidence index for February, which came in as expected. I don’t recall the last time that had a perceptible influence on mortgage rates. And the same goes for tomorrow’s housing starts and building permits, also for February.
The two reports that might move mortgage rates this week are both March purchasing managers’ indexes (PMIs) from S&P. One covers the services sector and the other manufacturing.
They’re both expected to show purchasing activity slowing modestly. But I’ll brief you more fully on what to expect on Wednesday.
Friday has no scheduled economic reports. However, three Fed speakers, including Chair Jerome Powell, have speaking engagements that day. Those could be an opportunity to reinforce messages communicated on Wednesday and to correct any misunderstandings. So, they could have an impact on mortgage rates.
Don’t forget you can always learn more about what’s driving mortgage rates in the most recent weekend edition of this daily report. These provide a more detailed analysis of what’s happening. They are published each Saturday morning soon after 10 a.m. (ET) and include a preview of the following week.
Recent trends
According to Freddie Mac’s archives, the weekly all-time lowest rate for 30-year, fixed-rate mortgages was set on Jan. 7, 2021, when it stood at 2.65%. The weekly all-time high was 18.63% on Sep. 10, 1981.
Freddie’s Mar. 14 report put that same weekly average at 6.74% down from the previous week’s 6.88%. But note that Freddie’s data are almost always out of date by the time it announces its weekly figures.
Expert forecasts for mortgage rates
Looking further ahead, Fannie Mae and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.
And here are their rate forecasts for the four quarters of 2024 (Q1/24, Q2/24 Q3/24 and Q4/24).
The numbers in the table below are for 30-year, fixed-rate mortgages. Fannie’s were updated on Feb. 12 and the MBA’s on Feb. 20.
Forecaster
Q1/24
Q2/24
Q3/24
Q4/24
Fannie Mae
6.5%
6.3%
6.1%
5.9%
MBA
6.9%
6.6%
6.3%
6.1%
Of course, given so many unknowables, both these forecasts might be even more speculative than usual. And their past record for accuracy hasn’t been wildly impressive.
Important notes on today’s mortgage rates
Here are some things you need to know:
Typically, mortgage rates go up when the economy’s doing well and down when it’s in trouble. But there are exceptions. Read ‘How mortgage rates are determined and why you should care’
Only “top-tier” borrowers (with stellar credit scores, big down payments, and very healthy finances) get the ultralow mortgage rates you’ll see advertised
Lenders vary. Yours may or may not follow the crowd when it comes to daily rate movements — though they all usually follow the broader trend over time
When daily rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
Refinance rates are typically close to those for purchases.
A lot is going on at the moment. And nobody can claim to know with certainty what will happen to mortgage rates in the coming hours, days, weeks or months.
Find your lowest mortgage rate today
You should comparison shop widely, no matter what sort of mortgage you want. Federal regulator the Consumer Financial Protection Bureau found in May 2023:
“Mortgage borrowers are paying around $100 a month more depending on which lender they choose, for the same type of loan and the same consumer characteristics (such as credit score and down payment).”
In other words, over the lifetime of a 30-year loan, homebuyers who don’t bother to get quotes from multiple lenders risk losing an average of $36,000. What could you do with that sort of money?
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Mortgage rate methodology
The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.
How your mortgage interest rate is determined
Mortgage and refinance rates vary a lot depending on each borrower’s unique situation.
Factors that determine your mortgage interest rate include:
Overall strength of the economy — A strong economy usually means higher rates, while a weaker one can push current mortgage rates down to promote borrowing
Lender capacity — When a lender is very busy, it will increase rates to deter new business and give its loan officers some breathing room
Property type (condo, single-family, town house, etc.) — A primary residence, meaning a home you plan to live in full time, will have a lower interest rate. Investment properties, second homes, and vacation homes have higher mortgage rates
Loan-to-value ratio (determined by your down payment) — Your loan-to-value ratio (LTV) compares your loan amount to the value of the home. A lower LTV, meaning a bigger down payment, gets you a lower mortgage rate
Debt-To-Income ratio — This number compares your total monthly debts to your pretax income. The more debt you currently have, the less room you’ll have in your budget for a mortgage payment
Loan term — Loans with a shorter term (like a 15-year mortgage) typically have lower rates than a 30-year loan term
Borrower’s credit score — Typically the higher your credit score is, the lower your mortgage rate, and vice versa
Mortgage discount points — Borrowers have the option to buy discount points or ‘mortgage points’ at closing. These let you pay money upfront to lower your interest rate
Remember, every mortgage lender weighs these factors a little differently.
To find the best rate for your situation, you’ll want to get personalized estimates from a few different lenders.
Verify your new rate. Start here
Are refinance rates the same as mortgage rates?
Rates for a home purchase and mortgage refinance are often similar.
However, some lenders will charge more for a refinance under certain circumstances.
Typically when rates fall, homeowners rush to refinance. They see an opportunity to lock in a lower rate and payment for the rest of their loan.
This creates a tidal wave of new work for mortgage lenders.
Unfortunately, some lenders don’t have the capacity or crew to process a large number of refinance loan applications.
In this case, a lender might raise its rates to deter new business and give loan officers time to process loans currently in the pipeline.
Also, cashing out equity can result in a higher rate when refinancing.
Cash-out refinances pose a greater risk for mortgage lenders, so they’re often priced higher than new home purchases and rate-term refinances.
Check your refinance rates today. Start here
How to get the lowest mortgage or refinance rate
Since rates can vary, always shop around when buying a house or refinancing a mortgage.
Comparison shopping can potentially save thousands, even tens of thousands of dollars over the life of your loan.
Here are a few tips to keep in mind:
1. Get multiple quotes
Many borrowers make the mistake of accepting the first mortgage or refinance offer they receive.
Some simply go with the bank they use for checking and savings since that can seem easiest.
However, your bank might not offer the best mortgage deal for you. And if you’re refinancing, your financial situation may have changed enough that your current lender is no longer your best bet.
So get multiple quotes from at least three different lenders to find the right one for you.
2. Compare Loan Estimates
When shopping for a mortgage or refinance, lenders will provide a Loan Estimate that breaks down important costs associated with the loan.
You’ll want to read these Loan Estimates carefully and compare costs and fees line-by-line, including:
Interest rate
Annual percentage rate (APR)
Monthly mortgage payment
Loan origination fees
Rate lock fees
Closing costs
Remember, the lowest interest rate isn’t always the best deal.
Annual percentage rate (APR) can help you compare the ‘real’ cost of two loans. It estimates your total yearly cost including interest and fees.
Also, pay close attention to your closing costs.
Some lenders may bring their rates down by charging more upfront via discount points. These can add thousands to your out-of-pocket costs.
3. Negotiate your mortgage rate
You can also negotiate your mortgage rate to get a better deal.
Let’s say you get loan estimates from two lenders. Lender A offers the better rate, but you prefer your loan terms from Lender B. Talk to Lender B and see if they can beat the former’s pricing.
You might be surprised to find that a lender is willing to give you a lower interest rate in order to keep your business.
And if they’re not, keep shopping — there’s a good chance someone will.
Fixed-rate mortgage vs. adjustable-rate mortgage: Which is right for you?
Mortgage borrowers can choose between a fixed-rate mortgage and an adjustable-rate mortgage (ARM).
Fixed-rate mortgages (FRMs) have interest rates that never change unless you decide to refinance. This results in predictable monthly payments and stability over the life of your loan.
Adjustable-rate loans have a low interest rate that’s fixed for a set number of years (typically five or seven). After the initial fixed-rate period, the interest rate adjusts every year based on market conditions.
With each rate adjustment, a borrower’s mortgage rate can either increase, decrease, or stay the same. These loans are unpredictable since monthly payments can change each year.
Adjustable-rate mortgages are fitting for borrowers who expect to move before their first rate adjustment, or who can afford a higher future payment.
In most other cases, a fixed-rate mortgage is typically the safer and better choice.
Remember, if rates drop sharply, you are free to refinance and lock in a lower rate and payment later on.
How your credit score affects your mortgage rate
You don’t need a high credit score to qualify for a home purchase or refinance, but your credit score will affect your rate.
This is because credit history determines risk level.
Historically speaking, borrowers with higher credit scores are less likely to default on their mortgages, so they qualify for lower rates.
So, for the best rate, aim for a credit score of 720 or higher.
Mortgage programs that don’t require a high score include:
Conventional home loans — minimum 620 credit score
FHA loans — minimum 500 credit score (with a 10% down payment) or 580 (with a 3.5% down payment)
VA loans — no minimum credit score, but 620 is common
USDA loans — minimum 640 credit score
Ideally, you want to check your credit report and score at least 6 months before applying for a mortgage. This gives you time to sort out any errors and make sure your score is as high as possible.
If you’re ready to apply now, it’s still worth checking so you have a good idea of what loan programs you might qualify for and how your score will affect your rate.
You can get your credit report from AnnualCreditReport.com and your score from MyFico.com.
How big of a down payment do I need?
Nowadays, mortgage programs don’t require the conventional 20 percent down.
Indeed, first-time home buyers put only 6 percent down on average.
Down payment minimums vary depending on the loan program. For example:
Conventional home loans require a down payment between 3% and 5%
FHA loans require 3.5% down
VA and USDA loans allow zero down payment
Jumbo loans typically require at least 5% to 10% down
Keep in mind, a higher down payment reduces your risk as a borrower and helps you negotiate a better mortgage rate.
If you are able to make a 20 percent down payment, you can avoid paying for mortgage insurance.
This is an added cost paid by the borrower, which protects their lender in case of default or foreclosure.
But a big down payment is not required.
For many people, it makes sense to make a smaller down payment in order to buy a house sooner and start building home equity.
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Choosing the right type of home loan
No two mortgage loans are alike, so it’s important to know your options and choose the right type of mortgage.
The five main types of mortgages include:
Fixed-rate mortgage (FRM)
Your interest rate remains the same over the life of the loan. This is a good option for borrowers who expect to live in their homes long-term.
The most popular loan option is the 30-year mortgage, but 15- and 20-year terms are also commonly available.
Adjustable-rate mortgage (ARM)
Adjustable-rate loans have a fixed interest rate for the first few years. Then, your mortgage rate resets every year.
Your rate and payment can rise or fall annually depending on how the broader interest rate trends.
ARMs are ideal for borrowers who expect to move prior to their first rate adjustment (usually in 5 or 7 years).
For those who plan to stay in their home long-term, a fixed-rate mortgage is typically recommended.
Jumbo mortgage
A jumbo loan is a mortgage that exceeds the conforming loan limit set by Fannie Mae and Freddie Mac.
In 2023, the conforming loan limit is $726,200 in most areas.
Jumbo loans are perfect for borrowers who need a larger loan to purchase a high-priced property, especially in big cities with high real estate values.
FHA mortgage
A government loan backed by the Federal Housing Administration for low- to moderate-income borrowers. FHA loans feature low credit score and down payment requirements.
VA mortgage
A government loan backed by the Department of Veterans Affairs. To be eligible, you must be active-duty military, a veteran, a Reservist or National Guard service member, or an eligible spouse.
VA loans allow no down payment and have exceptionally low mortgage rates.
USDA mortgage
USDA loans are a government program backed by the U.S. Department of Agriculture. They offer a no-down-payment solution for borrowers who purchase real estate in an eligible rural area. To qualify, your income must be at or below the local median.
Bank statement loan
Borrowers can qualify for a mortgage without tax returns, using their personal or business bank account as evidence of their financial circumstances. This is an option for self-employed or seasonally-employed borrowers.
Portfolio/Non-QM loan
These are mortgages that lenders don’t sell on the secondary mortgage market. And this gives lenders the flexibility to set their own guidelines.
Non-QM loans may have lower credit score requirements or offer low-down-payment options without mortgage insurance.
Choosing the right mortgage lender
The lender or loan program that’s right for one person might not be right for another.
Explore your options and then pick a loan based on your credit score, down payment, and financial goals, as well as local home prices.
Whether you’re getting a mortgage for a home purchase or a refinance, always shop around and compare rates and terms.
Typically, it only takes a few hours to get quotes from multiple lenders. And it could save you thousands in the long run.
Time to make a move? Let us find the right mortgage for you
Current mortgage rates methodology
We receive current mortgage rates each day from a network of mortgage lenders that offer home purchase and refinance loans. Those mortgage rates shown here are based on sample borrower profiles that vary by loan type. See our full loan assumptions here.
My work on housing moves around the 10-year yield and the economics that move that. The growth rate of inflation has fallen a lot on the year-over-year data, but mortgage rates haven’t gone down, which isn’t surprising to me as my mantra has been:“Labor over Inflation.”
For 2024, the 10-year yield running between 3.80%-4.25% looks perfectly normal to me as long as the economic data is firm and the Fed hasn’t pivoted. I can’t see the 10-year yield below 3.37% unless the labor market breaks — meaning jobless claims over 323,000 on the four-week moving average. That means I can’t see mortgage rates going below 6%, especially with the spreads being bad, until the labor market or the economy gets weaker.
However, now we are at the same spot as last year, near the critical 4.34% level and we have the Federal Reserve meeting coming up. This is a big week, as you can see in the chart below.
With mortgage rates above 7% again, we will have to see what the Fed says at this meeting because, in the past few meetings, they have made it clear that policy is restrained and that they don’t want it to get too restrictive. This is what happened last year when the 10-year yield headed to 5% and we had 8% mortgage rates. However, there is a risk of the Fed sounding too hawkish again which would send the 10-year yield higher.
Purchase application data
As mortgage rates have been falling recently, we saw back-to-back weeks of growth in the purchase application data, which aligns with what we saw last year. Remember, we are working from extremely depressed levels in this data line, so the bar is so low that it doesn’t take much to move the needle.
Since November 2023, we have had 10 positive and five negative purchase application prints after making holiday adjustments. Year to date, we have had four positive prints versus five negative prints. Clearly, if mortgage rates can head toward 6% and hold we will get rising demand, but I believe the Federal Reserve wouldn’t be able to sleep at night if more people were buying homes.
Weekly housing inventory data
The one positive story for me in housing this year is that inventory is growing year over year for both active inventory and new listing data. I know it’s not a lot, but growth is growth. The one benefit of higher rates is that inventory can grow in the post-2010 qualified mortgage world as long as higher rates create softness in demand. It hasn’t been a lot of growth historically, but growth is growth.
Last year, the seasonal inventory bottom happened on April 14, which was the the longest time to find a seasonal bottom ever. This means we will show more than normal inventory growth until we get past tax day 2024.
Here is a look at the inventory last week:
Weekly inventory change (March 8-15 ): Inventory rose from 500,579 to 507,160
The same week last year (March 9-16): Inventory rose from 413,199 to 414,967
The all-time inventory bottom was in 2022 at 240,194
The inventory peak for 2023 was 569,898
For some context, active listings for this week in 2015 were 982,639
New listings data
New listings are growing yearly, which is another plus for housing. Last year, II picked up on the trend that new listing data was creating a historical bottom as the data line wasn’t heading lower with higher rates. The growth is a tad lighter than what I was hoping for. But as someone who didn’t buy the mortgage rate lockdown premise that inventory can’t grow with higher rates, this year is a good test case.
Here’s the weekly new listing data for last week over several previous years:
2024: 59,542
2023: 41,415
2022: 54,542
For some historical context, new listing data this week in 2010 was 306,020.
Price-cut percentage
Every year, one-third of all homes take a price cut before selling — this is regular housing activity and this data line is very seasonal. The price-cut percentage can grow when mortgage rates move higher and demand gets hit. When rates fall, they go lower than an average year.
Inventory is higher than last year, and we might have found the bottom already, so as the year progresses, the number of homes taking a price cut should increase. The goal is to see how the mortgage rate variable plays into this data line. This is why this week’s Fed meeting is key, to see if the 10-year yield can break higher, which should increase the price-cut data.
Here’s the percentage of homes that took a price cut before selling last week and how that compares to the same week in previous years:
2024: 31%
2023: 30%
2022: 17%
Week ahead: The Fed and housing data
The Federal Reserve’s language and the dot plot are the two things to watch this week. The dot plot should still show many Fed members having two to three rate cuts in play for 2024, with some going the opposite way from that group. We also will have tons of housing data coming out this week, including the builders’ confidence, housing starts, existing home sales, and Zillow home price data. However, the key is the Fed, Fed and the Fed!
For Moriello, she previously explained why it’s fairly easy for existing clients — including forward mortgage borrowers — already served by the company to be flagged as potential reverse mortgage customers once they reach the age of eligibility. For the HECM program, a company professional could look into their customer relationship management (CRM) software and see when a client could potentially qualify for a reverse mortgage.
“Any loan officer can run a report in their own database to calculate when someone’s date of birth hits that prime age [for a reverse mortgage],” Moriello said.
While some may think that certain technology tools are either forward-specific or reverse-specific, Moriello says that the tools at her company are often interchangeable by forward and reverse professionals.
Still, there are advantages to being a lender that is active in both forward and reverse, she explained.
“I feel like, as a loan officer that can look at all products and decide to show the client what different products — like a home equity line, a forward mortgage or a reverse mortgage — can do for them, it gives me the unique opportunity to present all products to them at the same time,” she explained. “[It helps me] give them an understanding about how each product would serve them.”
2024 HECM limit
On Jan. 1, the limit for HECM loans was increased to $1,149,825 by the Federal Housing Administration (FHA). Loan originators who have spoken with RMD on the topic generally find the increase welcome, but they do not feel that the higher limit is a “game-changer” when it comes to new business this year.
Moriello thinks it could be potentially beneficial overall.
“It’s absolutely a consideration,” she said. “I’m in the Northeast, so the higher the dollar amount, the better. I had a conversation [with a borrower] where we were talking through the benefits of taking out a HECM line of credit [for] future planning, [including] the growth rate tied to the HECM line credit.”
Still, despite the potential utility of a higher HECM limit, there are still some product gaps that the proprietary market could serve for people with higher-value homes, she said.
“When I sat down with this borrower, I realized I’ve got to run both the HECM and the proprietary for this client due to the value of the home,” she said. “I wish that we had a proprietary product that had more of a growth-rate line-of-credit option more similar to the HECM.”
Receptivity of referral partners, clients
When asked about openness to reverse mortgages from business referral partners and borrowers, Moriello explained that getting a curt “no thanks” is still common. But for those who might find a benefit in a reverse mortgage, they’re more open of late to explore the possibility.
“More often than not, these high-level professionals are looking for options for their clients,” she said, “whether those options are to help them buy a new home, to live a better life with more assets in retirement, or to help them get a non-taxable stream of cash flow to help them in retirement. They’re looking at opportunities.”
Certain longstanding issues have not gone away, including a perception by some financial planners that makes them feel reverse mortgages are not an option that can even be explored, let alone discussed. But modern classes of financial planners generally seem to be more open to conversations, based on Moriello’s conversations.
“These financial planners are much higher caliber and quality than I’ve ever seen before, but yet the understanding of the compliance behind it causes them to have to take a step back,” she said. “And sometimes they feel they can’t even talk about a reverse mortgage. It’s not as often as it used to be, which is a good thing.”
Spending speed
As for what’s fueling these greater levels of openness, Moriello said it could come from a lot of places, but the speed with which clients are burning through money today is a clear possibility.
“I know from what I can see, it is absolutely tied to how fast people are going through money,” she said. “I can absolutely see that these professionals are worried that their folks are going to run out of money.
“We were just talking here in the office about our own electric bills, which have effectively doubled in our area. That’s one thing when you’re still working, but what happens when you’re on a fixed income?”
That puts far more pressure on fixed-income retirees, which could lead to conversations about tapping into home equity, she said.
“What that means is folks need to take more money out of retirement than they ever have before, and the financial professionals are looking at understanding that. So, they’re looking at options to help them extend the life of their assets so that they can continue to live well in retirement.”
Editor’s Note: Options are not suitable for all investors. Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Please see the Characteristics and Risks of Standardized Options.
The greenshoe option allows underwriters involved with IPOs to sell more shares than initially agreed upon: usually up to 15% more. That can occur if there is enough investor demand to purchase the shares.
Because IPO share prices can be volatile, the greenshoe option is an important tool that can help underwriters stabilize the price of a newly listed stock to protect both the company and investors.
Understanding the Greenshoe Option
Also called the over-allotment option, the greenshoe provision is part of an underwriting agreement between an underwriter and a company issuing stock as part of an IPO, or initial public offering. The greenshoe option is the only type of price stabilization allowed by the Securities and Exchange Commission (SEC).
The SEC allows this because it increases competitiveness and efficiency of IPO fundraising. It gives underwriters the ability to stabilize security prices by increasing the available supply. It is the responsibility of an underwriter to help sell shares, build a market for a new stock, and use the tools at their disposal to launch a successful initial public offering.
The greenshoe option got its name when the Green Shoe Manufacturing Company was issued the first over-allotment options in 1919.
💡 Quick Tip: Access to IPO shares before they trade on public exchanges has usually been available only to large institutional investors. That’s changing now, and some brokerages offer pre-listing IPO investing to qualified investors.
How Does a Greenshoe Option Work?
During the IPO process, stock issuers set limits on how many shares they will sell to investors during an IPO. With a greenshoe option, the IPO underwriter can sell up to 15% more shares than the set amount.
IPO underwriters want to sell as many shares as they can because they earn on commission as a percentage of IPO sales.
All of the details about an IPO sale and underwriter abilities appear in the prospectus filed by the issuing company before the sale. Not every company allows their investment banker to use the greenshoe option. For instance, if they only want to raise a specific amount of capital, they wouldn’t want to sell any more shares than necessary to raise that money.
There are two ways an underwriter can over allot sales:
At the IPO Price
If the IPO they are underwriting is doing well, investors are buying IPO shares and the price is going up, the underwriter can use the greenshoe option to purchase up to 15% more stock from the issuing company at the IPO price and sell that stock to investors at the higher market price for a profit.
A Break Issue
Conversely, if an IPO isn’t doing well, the underwriter can take a short position on up to 15% of the issued stock and buy back shares from the market to stabilize the price and cover their position.
The underwriter then returns those additional shares to the issuing company. This is known as a “break issue.” When an IPO isn’t performing well, this can reduce consumer confidence in the stock, and result in investors either selling their shares or refraining from buying them.
The greenshoe option helps the underwriter stabilize the stock price and reduce stock volatility.
Types of Greenshoe Options
There are three types of greenshoe options an underwriter might choose to use depending on what happens after an IPO launches. These options are:
Full Greenshoe
If the underwriter can’t buy back any shares before the stock price increases, this is known as a full greenshoe. In this case, the underwriter buys shares at the current offering price.
Partial Greenshoe
In a partial greenshoe scenario, the underwriter only buys back some of the stock inventory they started with in order to increase the share price.
Reverse Greenshoe
The third option for underwriters is to purchase shares from market investors and sell them back to the stock issuer if the share price has dipped below the original offering price. This is similar to a put option in stock trading.
Recommended: How Are IPO Prices Set?
Greenshoe Option Examples
Here’s an example of how a greenshoe option might work in real life.
Once the IPO company owners, underwriter, and clients determine the offering or initial price of the newly issued shares, they’re ready to be traded on the public market. Ideally, the share price will rise above offering, but if the shares fall below the offering price the underwriter can exercise the greenshoe option (assuming the company had approved it in the prospectus).
To control the price, the underwrite can short up to 15% more shares than were part of the original IPO offering.
Let’s say a company’s initial public offering is going to be 10 million shares. The underwriters can sell up to 15% over that amount, or 1.5 million more shares, thus giving underwriters the ability to increase or decrease the supply as needed — adding to liquidity and helping to control price stability.
💡 Quick Tip: Investment fees are assessed in different ways, including trading costs, account management fees, and possibly broker commissions. When you set up an investment account, be sure to get the exact breakdown of your “all-in costs” so you know what you’re paying.
What the Greenshoe Option Means for IPO Investors
The greenshoe option is an important tool for underwriters that can help with the success of an IPO and bring additional funds to the issuing company. It reduces risk for the issuing company as well as investors. It can maintain IPO investor confidence in a newly issued stock which helps to build a long-term group of shareholders.
Although buying IPO stocks can be very profitable, stock prices don’t always increase and sometimes they can be volatile. It’s important for investors to research a company, look at the IPO prospectus, understand what the stock lock-up period and greenshoe options are before deciding to buy.
The Takeaway
Buying shares in IPOs can be a great way to invest in companies right when they go public. Although IPO investing comes with some risks, and IPO stock can be volatile, investment banks and companies going public use tools such as the greenshoe option to minimize volatility.
Whether you’re curious about exploring IPOs, or interested in traditional stocks and exchange-traded funds (ETFs), you can get started by opening an account on the SoFi Invest® brokerage platform. On SoFi Invest, eligible SoFi members have the opportunity to trade IPO shares, and there are no account minimums for those with an Active Investing account. As with any investment, it’s wise to consider your overall portfolio goals in order to assess whether IPO investing is right for you, given the risks of volatility and loss.
For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.
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Investing in an Initial Public Offering (IPO) involves substantial risk, including the risk of loss. Further, there are a variety of risk factors to consider when investing in an IPO, including but not limited to, unproven management, significant debt, and lack of operating history. For a comprehensive discussion of these risks please refer to SoFi Securities’ IPO Risk Disclosure Statement. IPOs offered through SoFi Securities are not a recommendation and investors should carefully read the offering prospectus to determine whether an offering is consistent with their investment objectives, risk tolerance, and financial situation.
New offerings generally have high demand and there are a limited number of shares available for distribution to participants. Many customers may not be allocated shares and share allocations may be significantly smaller than the shares requested in the customer’s initial offer (Indication of Interest). For SoFi’s allocation procedures please refer to IPO Allocation Procedures.
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Inside: Proofreading is more than just catching errors; it’s an essential final touch in the writing process. If you want to turn your attention to detail into a career, allow this guide to enlighten your path to becoming a professional proofreader.
In a rapidly advancing digital age characterized by burgeoning AI capabilities, the art of proofreading remains not only relevant but fundamentally essential.
Today, proofreaders are the unsung guardians of clarity, maintaining and enhancing the rich tapestry of the written word. They are the bridge between AI’s raw computational power and the intricate subtleties of human expression. To embark on In today’s AI-driven era, the role of a proofreader is evolving yet remains an indispensable asset in the echelons of written communication.
While spellchecker tools and grammar correction algorithms, such as those embedded in Google Docs and implemented by Grammarly, streamline basic editing tasks with a click, the nuanced understanding of language intricacies still falls within the human domain. It is the human eye that captures the essence of context, tone, and the writer’s singular style—factors that AI, in its current state, is yet to fully comprehend.
Becoming a proofreader offers the flexibility to be your own boss and set your own schedule, allowing you to work around other life commitments.
With the consistently high demand for proofreading and the ability to work from anywhere, it provides both a stable career path and the opportunity to experience new and interesting careers.
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Understanding What a Proofreader Does
A proofreader is a guardian of grammar, a sentinel of syntax—a final reviewer ensuring that texts are free from errors before they reach the public.
This vital role involves meticulous examination for any slips that might diminish the quality and clarity of the final product.
How do I become a proofreader with no experience?
Breaking into proofreading without prior experience may seem daunting, but it’s entirely attainable.
Initiate your journey by seeking comprehensive training, such as a proofreading course, which often includes substantial practice material to simulate real-world experience.
This is one of the best ways to make money online for beginners.
What qualifications do I need to be a proofreader?
While there’s no fixed rulebook for proofreading qualifications, a command of language and a fine-tuned eye for detail are essential.
A formal certification is beneficial, but it’s your demonstrated skills and experience that will truly make you a sought-after proofreader.
How to Become A Proofreader
Breaking into the world of proofreading can transform your passion for words into a lucrative career or a flexible side job.
This section will explore the meticulous path to becoming a professional proofreader, offering practical tips to help you refine your skills, equip yourself with the necessary tools, and navigate the job market effectively. From cultivating a deep love for reading to marketing your expertise, we’ll guide you through each step to ensure your journey toward proofreading proficiency is clear and achievable.
This is how you can make 10k a month.
Step #1 – Acquiring Essential Proofreading Skills
Attention to detail is the cornerstone of proofreading, as it enables you to catch mistakes that others may overlook. Equally crucial is a strong command of the language, allowing you to navigate through intricate grammar and punctuation with precision, ensuring the text reads flawlessly.
Understanding varied writing styles and mastering style guides like Chicago, APA, and AP is pivotal in proofreading.
This knowledge ensures accuracy in diverse documents, adapts to client preferences, and maintains the document’s integrity according to recognized standards.
Make sure you are great at meeting deadlines!
Step # 2- Certification and Training for Proofreaders
Deciding on a proofreading certificate depends on your career strategy. While not mandatory, a certification can bolster your credibility, demonstrate your commitment to the craft, and may provide a competitive edge when approaching potential clients or employers in the industry.
Selecting the right proofreading course is crucial for gaining a strong foothold in the industry.
Search for programs with a balanced mix of theory and applied learning, mentorship from seasoned professionals, and ideally, one that aligns with your specific area of interest within the broad field.
Also, look for courses that help you to land your first proofreading gig. You want to see any typo fast!
Transcript Proofreading
Get the step-by-step guide Caitlin Pyle used to build a thriving at-home business making a full-time income!
A booming legal industry means that transcript proofreaders are in higher demand than ever…
Step #3 – Building Your Proofreading Toolkit
Every proofreader needs a reliable set of tools. Essential software includes Microsoft Word for detailed editing, Google Docs for easy collaboration, Grammarly for grammar checks, the Hemingway App for readability improvements, and McGraw Hill’s Proofreading Guidebook as a comprehensive reference.
Crafting an efficient proofreading process is key to maintaining high standards of work.
This involves systematic reading for different types of punctuation errors or grammar mistakes, employing tools strategically, and setting up checklists that align with specific document requirements to ensure a thorough review every time.
Step #4 – Gaining Practical Experience
Practical experience in proofreading is invaluable as it not only sharpens your eye for detail but also builds a robust portfolio that demonstrates your ability to handle diverse materials. Many people start with a blog.
It provides tangible proof of your skills to prospective clients, showcasing your efficiency in enhancing various texts, which is often more convincing than theoretical knowledge alone.
Formal Education vs. On-the-Job Experience: Formal education in English or communication can provide foundational knowledge, but isn’t always required for proofreading roles. On-the-job experience develops the practical skills needed to succeed in the field.
Volunteering and Internship Opportunities: Volunteering and internships offer valuable experience and are a practical approach to entering the publishing industry. Seek opportunities for content editing for student publications, small businesses, or nonprofit organizations to hone your skills and grow your professional network.
Practice with Real-world Editing Exercises: This prepares you for client work. Utilize resources like Purdue Writing Center’s exercises or the Chartered Institute of Editing and Proofreading’s quizzes to test and refine your abilities in a practical, hands-on manner.
Step #5 – Marketing Yourself as a Proofreader
Marketing yourself as a proofreader is pivotal in attracting clients and establishing a steady work stream in a competitive industry. It is the key to building brand awareness and showcasing your expertise, differentiating your services in the crowded marketplace.
Creating a Professional Resume and Portfolio: To present yourself as a credible proofreader, craft a resume highlighting relevant skills and experiences. Include a portfolio showcasing a range of proofreading projects. If you’re starting, include testimonials and detail any related training or certificates to demonstrate your commitment and competence.
Networking and Leveraging Online Platforms: Utilize platforms like LinkedIn to connect with industry peers and potential clients. Participate in forums and proofreading groups to stay informed and visible in the community. Engaging actively online can lead to valuable opportunities and collaborations.
Delve deeper into your craft with advanced courses and stay updated on language trends. Embracing niche specialization, such as legal or technical documents, can heighten your expertise and attract a more specific clientele.
Step #6 – Finding Freelance Proofreading Jobs
For entry-level proofreaders, platforms like Fiverr can kickstart your gig journey despite its low-cost market reputation. Check out Upwork or AngelList for a broader scope of opportunities.
Specialized job boards or proofreading service companies can also offer targeted job prospects to grow your experience.
Professional courses, such as those offered by Proofread Anywhere, can significantly enhance your skills, thereby increasing your likelihood of securing clients.
Step # 7 – Setting Competitive Rates and Billing Clients
Determining competitive rates for your proofreading services involves accounting for your skill level, the complexity of the work, and industry standards.
According to Proofread Anywhere, those who are starting can expect to earn around $0.03 per word, while proofreaders with a few years of experience often earn around $0.10 to $0.15 per word.
Remember to underscore value over price to clients, and utilize professional invoicing software for billing.
For many, this provides a great life-work balance for those wanting to make money as a stay at home mom.
Learn the Skill to Proofread Anywhere
Are you passionate about words and reading?
If so, proofreading could be a perfect fit for you, just like it’s been for countless of my readers!
Learn how you can create a freelance business as a proofreader.
Step #8 – Scaling Your Proofreading Career
Scaling your proofreading business involves more than just honing your skills; it requires a strategic approach to marketing to attract a broader client base. By concentrating on active marketing techniques like networking and reaching out to potential clients, you can accelerate the growth and scalability of your proofreading services.
Transitioning from freelancing to business ownership requires deliberate planning and goal-setting. You must establish a realistic timeline and create a comprehensive business plan outlining services, target clients, and marketing strategies.
Don’t forget to consider also the administrative and financial duties that come with business management.
Also, continuous skill improvement is critical to staying competitive as a proofreader.
FAQs
No, a degree is not a prerequisite for becoming a proofreader. Various paths lead to a career in proofreading, and while some positions may require a degree, many others prioritize skill, precision, and practical experience over formal education.
According to Proofread Anywhere, a proofreader can earn an annual salary of around $53,733 per year. However, the salary depends on experience, skill, niche, and who you work for.
But with the right strategies, the potential to earn more is significant, especially for skilled freelancers.
Without experience, focus on platforms offering entry-level proofreading jobs such as Fiverr, Upwork, or FlexJobs. Networking can also be a powerful tool; let your personal and professional contacts know you’re offering proofreading services. Finally, consider volunteering to build your portfolio and gain references.
Now, How to get Proofreading Work?
Embarking on a journey to become a sought-after proofreader can be significantly streamlined by enrolling in the Proofread Anywhere course.
By choosing this comprehensive program, individuals gain access to expert knowledge and practical tips from someone with proven success in the industry.
Not only will the course equip you with the essential skills needed to identify errors and enhance text quality, but it also serves as a springboard for securing gigs and establishing a thriving freelance business.
Additionally, Proofread Anywhere connects you with a network of like-minded professionals, which can be invaluable as you navigate the competitive field of proofreading. Set yourself apart from the competition by starting with a course that offers a direct route to proficiency and professional recognition in the proofreading world.
If you are looking to make 5000 dollars fast, this is a great method.
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Market value is a common term used in value investing to describe how much a company or asset is worth on exchanges and financial markets. Essentially it is the value of a security in the eyes of market investors. Understanding the current standing of a business in its particular industry and the broader market is important when making investing decisions.
What Is Market Value?
Market value, also referred to as OMV, market capitalization, or “open market valuation,” is the price of an asset in an investment marketplace or the value the asset has within a community of investors. It is calculated by multiplying current share price in a marketplace by the number of outstanding shares. Read on to learn what market value is and how to calculate market value.
The market value represents the price that investors will pay for an asset, and therefore changes significantly over time. The more investors will pay for the asset, the higher the market value.
What investors are willing to pay depends on various factors, including the fundamentals of the asset itself, as well as the business cycle and current levels of demand for that asset. Market value could be anything from under $1 million for small businesses to more than $1 trillion for large corporations.
It’s easy to determine the market value of frequently traded assets (by looking at their current prices), but harder to determine the market value of illiquid assets, such as real estate or a company, that don’t trade very often. Market value per share is a company’s market value divided by its number of shares.
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Factors that Impact Market Value
Many factors determine market value, including a company’s profitability and its debt levels. Market value fluctuates significantly over time. Market values often move in tandem with the overall market sentiment.
During bull markets or economic expansions, market values often increase, and during bear markets they go down. Other factors influencing market value include:
• The company’s performance
• Long-term growth potential
• Supply and demand of the asset
• Company profitability
• Company debt
• Overall market trends
• Industry trends
• Valuation ratios such as earnings per share, book value per share, and price-to-earnings ratio (P/E ratio)
Earnings per Share
The higher a company’s earnings per share, the more profitable it is. A more profitable business has a higher market value, and vice versa.
Book Value per Share
Investors calculate a company’s book value per share by dividing its equity by its total outstanding shares. A company with a higher book value than market value may have an undervalued stock.
Price-to-Earnings Ratio (P/E Ratio)
Investors calculate P/E ratio by dividing a company’s current stock price by its earnings per share amount. A higher P/E ratio means a stock’s price market value might be high relative to its earnings.
💡 Quick Tip: When you’re actively investing in stocks, it’s important to ask what types of fees you might have to pay. For example, brokers may charge a flat fee for trading stocks, or require some commission for every trade. Taking the time to manage investment costs can be beneficial over the long term.
How Is Market Value Calculated?
There are multiple ways to calculate market value. Here’s a look at a few of them:
Income method
There are two methods of calculating market value using income:
• Discounted Cash Flow (DCF): To find discounted cash flow, investors project a company’s future cash flow and then discount it to find its present value. The amount it gets discounted reflects current market interest rates along with the amount of risk the business has.
• Capitalized Earnings Method: With capitalized earnings, investors find the value of a stable, income-producing property by taking its net operating income over time and dividing it by the capitalization rate. The capitalization rate is an estimate of how much potential return on investment the asset has.
Assets Method
Using the assets approach, investors find an asset’s fair market value (FMV) by determining how many liabilities and adjusted assets a company has, including intangible assets, unrecorded liabilities, and off-balance sheet assets.
Market method
Using a market-based approach, there are a few more ways market value can be determined:
• Public Company Comparable: This company compares similar businesses that are in the same industry or region and about the same size. Ratios like P/E, EV/Revenue, and EV/EBITDA can help compare all the similar companies.
• Precedent Transactions: Using the precedent transactions method, market value reflects how much investors paid for other similar company’s stock in previous transactions. Investors can get a sense of how much a company’s value is by looking at similar companies.
Example of Market Value
Using the capitalized earnings valuation method, here’s an example of the market value calculation. The formula used when calculating via capitalized earnings is as such:
Market value = Earnings/capitalization rate
Earnings are rather self-explanatory, and the capitalization rate is the required rate of return for investors, a number reached by subtracting a company’s expected growth rate from the investor’s expected rate of return. For this example, we’ll make things simple and say that the capitalization rate is 10%, and the company’s earnings are $1 million
Using the formula: Market value = $1 million/10%
That calculates to $10,000,000.
💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.
Limitations of Market Value
Market value is a very useful tool for understanding how much a company is worth and whether it is a good time to invest or sell its stock. However, it has a few limitations:
• Fluctuation: Company stocks go up and down every day, and, therefore market value also always changes. Various factors affect market value, and it is very dynamic, which is important for investors to keep in mind when making trading decisions.
• Precedent data: It’s easier to find market value for established businesses because it requires historical pricing data to find it. New businesses don’t have such data, making it harder for investors to determine their market value.
The Takeaway
Market value is very useful for analyzing a stock. It is easiest to calculate market value of assets such as stocks and futures that are traded on exchanges because it is easy to access their market prices. Market value for less frequently traded assets can be difficult and requires some assumptions and calculations.
Calculating market value can be useful for investors of all stripes, but it can be easy to get lost in the math. Be sure to double-check your math and consider the limitations of market value before making investing decisions.
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For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.
FAQ
Is market value the same as market capitalization?
Market value is the price at which a buyer purchases an asset, and can refer to a company or a security such as a stock, future, or asset. Market cap is the value of the total number of outstanding shares of a company, based on their current market value.
Is market value the same as book value?
Market value and book value per share, or explicit value, are different and can be very different amounts, but they are often used in conjunction by investors looking to gain an understanding of an asset’s value. Book value is the net value of a company’s balance sheet assets, while market value is the price at which a buyer purchases an asset.
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SoFi Invest® INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below:
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To paraphrase Julie Andrews and the Muppets: The springtime cometh for the housing market. This is traditionally the time when home sales bloom. But 2023’s deep freeze begs the question of whether the warming will emerge from under an ice cube or an iceberg. This season, the economists say, will be no picnic.
Take the typical home value of $349,216, which is more than 40% higher than before the pandemic. Home prices increased on a monthly basis in 45 of the 50 largest metropolitan areas in February, and they’re up in 47 of the 50 largest metropolitan areas on an annual basis, per Zillow. (By Redfin’s count, prices increased in all 50 of the most populous metropolitan areas, which is the first time that’s occurred since the summer of 2022.)
The typical mortgage payment more than doubled during the pandemic, rising by roughly 106%, and is still up 9% from last year, according to Zillow. Mortgage rates have fallen from their recent peak at slightly above 8%, but they’re still high compared to previous historic lows. While the average 30-year fixed mortgage rate is sitting at 7.02%, as of the latest reading, the expectation is that it’ll come down further if the Federal Reserve cuts interest rates this year.
So it’s not an easy market by any means, as Wells Fargo’s economics team recently concluded: “The housing market continues to navigate tumultuous waters.” But more inventory is coming on the market, with the easing of the so-called lock-in effect, which refers to homeowners holding onto their homes for fear of losing their low mortgage rates. The lock-in effect was a major factor last year in pushing existing home sales to their lowest point in almost 30 years.
“A substantial infusion of new inventory to the market is welcome news for buyers on the hunt for their next home this spring—and more evidence that the effects of ‘rate lock’ are starting to weaken,” Zillow’s chief economist wrote recently in a market report.
New listings of existing homes on Zillow are up 21% in February compared to last year and 20% from the prior month; on a local level, more sellers are coming back to the market in Dallas, Minneapolis, and Austin, where new listings are the highest. And according to Redfin, new listings are up 13%, which is the biggest annual increase in almost three years. The total number of homes for sale is up 3%, and that’s the biggest increase in nine months, Redfin’s data journalist, Dana Anderson, recently wrote in a market update. (Zillow’s analysis shows there are 12% more total active listings than last year.)
So maybe this year’s crucial spring selling season is shaping up more like a shopping window, if not a mini-spring season.
Pending sales are down 6% from the prior year, according to Redfin, which means high housing costs are continuing to price out some would-be homebuyers. There’s also competition even as the market has cooled down, particularly among “attractively-priced and well-marketed homes,” as Zillow put it. That doesn’t seem like it’ll ever completely change given the housing market is missing anywhere between 2 million and 7 million homes, despite an increase in listings.
So what’ll happen to existing home sales this year? They rose 3.1% in January from the previous month, but declined 1.7% from a year earlier. Better economic conditions, and a more stabilized housing market, might not solve all.
“Although lower financing costs, rising supply and brightening economic growth prospects may help home sales turn around from the sharp contraction experienced over the past two years, the recovery will likely be limited by adverse affordability conditions stemming from home price appreciation far outpacing income growth over the past several years,” Wells Fargo senior economist Charlie Dougherty and economic analyst Patrick Barley wrote in a newly shared note titled: “Housing Market 2024: An Early Spring or Longer Winter.”
We know lower mortgage rates will not only somewhat improve affordability, and therefore help bring back demand, but also bring more sellers onto the market and increase supply. It’s why Dougherty and Barley said existing home sales started off on a “positive note,” and expect them to improve modestly this year.
But it really comes down to the fact that “home price appreciation has far outpaced household income growth in recent years,” as the Wells Fargo economics team put it. “Home values are now roughly five times higher than median household incomes, a stark change from the 3.5 ratio averaged historically,” they wrote.
Not to mention, the Wells Fargo team expects home prices to increase another 3.1% in 2024 and 4.3% the year after. “If these forecasts come to fruition, then affordability is not likely to meaningfully improve,” Dougherty and Barley wrote.
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A lot has been written about whether now is the best time to buy stocks.
Many think that it is a good idea, and others are still skeptical. So which one should you believe?
This article will help answer the question once and for all with facts rather than opinions.
But first, let’s look at some statistics:
S&P 500 Total Returns for 2021 was 28.71% (source)
In the past 20 years (2003-2021), the S&P 500 was down three times. (source)
Over the 10 year period of 2011-2020, the S&P 500 averaged 13.9% (source)
With that said, will it be best to invest now?
Honestly, that is an answer no one can give you. And the movies about Wall Street won’t help you either.
However, you can learn to read charts become a technical analysis trader, and have a better idea of where the market is going.
The stock market is a volatile thing. It can go up or down at any time. As the statistics show, it goes up more often than down.
Is it Smart to Invest in Stocks?
The stock market is a great way to make money whether for income or for long-term investments. Plus it is a lot more accessible than you think.
With stocks on an upswing lately, it might be tempting to dive in. But do not get too excited just yet!
You must learn how to invest in stocks.
Are you ready to make money in the stock market? If so, learn the steps to start investing today.
In order to make educated decisions, it is crucial that you understand what makes stocks go up or down.
Since you might be asking yourself whether it is a good time to buy stocks after the market has been on such an upswing for several months. The answer is yes, but there are some important factors you should consider before handing over your money.
This article will discuss how the stock market works and provide you with reasons why now may not be a great time to invest in stocks as well as alternatives that could make sense for you if this is indeed a bad time to purchase them.
Read more!
What is the Stock Market?
The stock market is a system of securities, such as stocks and bonds, in which investors buy and sell ownership stakes to each other on various exchanges using money or their own businesses.
Simply put, the stock market is a place where people invest money.
There are many different ways to invest in the stock market, but one of the most popular ways is through buying stocks.
Investing in stocks is a commonly used way to make money.
In the stock market, people can buy and sell shares of companies they believe will rise in value. You can participate by investing in the stock market by buying individual shares of a company like AMZN (Amazon), investing in an ETF like VTI, or investing with a mutual fund, such as VTSAX.
One former assistant principal, Teri Ijeoma, changed her life when she left her job as an educator and become an active trader.
What does it mean when the stock market is up or down
When the stock market is up, it means that stocks have been doing well.
Conversely, when the stock market is down, it means that stocks are losing value.
You have heard the saying… buy low, sell high.
Stocks are an investment that you can purchase in order to make a profit, but the best time to buy stocks is when they are at their lowest price.
If you bought a stock for $100 and its value increased by 10%, then your stock would be worth $110. However, if you bought 20 stocks at $100 and the value increased by 10%, then your new value is $2,200. If you are trading options, then your return (and risk) is much greater.
When the market is up or down there are always going to be opportunities to make money from the stock market!
The hardest part for the novice investor is to determine when to buy and sell.
Thankfully, there is a great investing course to help you figure out how to invest in stocks and options.
Timing the Stock Market
Can you even time the stock market?
Many people are concerned with timing the stock market because of its volatility. Honestly, no one knows what the stock market will do.
As a technical stock trader, you will learn based on previous actions how the market and individual stocks may react.
When day traders or swing traders “time” the market, they are using time frames to make their predictions. Those traders who manage their risk and potential losses well will do better in the market.
For the average investor or someone going off a friend or Reddit recommendation, timing the market can be detrimental to your portfolio.
The real answer to the question, “Is now a good time to buy stocks?” is that there’s no such thing as an ideal moment. It could be a great time or it could also be terrible timing. There are too many variables and market risks which makes this decision very difficult for investors.
Too many times, investors fall into the trap of panic selling while stock prices are low and buying when stocks are high on the fear of missing out (FOMO).
That is why the common knowledge states don’t time the market.
However, I can tell you that you can time the market. If (and it is a big if) you are willing to put the time and effort into an investing education as you would going to college.
Many people have found success in timing the market.
Why investing is always a good idea
Remember earlier in this post, we stated the stock market has averaged 13.9% over the past 10 years and only had 3 negative years in the past twenty.
Simply put, that means you can make money, and investing is a good idea.
That is better than the flip side of your money sitting in the back earning slightly above 0% and when you account for inflation, your money is worthless.
The stock market is (almost) always following an upwards trajectory.
This means investors are more likely to experience gains in their investments than they would if the prices were going down. Moreover, it’s almost never a good idea to just let your money sit doing nothing for years on end because inflation will eventually force you into losing value at some point.
Instead of waiting until then and hoping for the best, focus on what you want instead of what the market is doing at any specific moment.
Must Read: How To Invest In Stocks For Beginners: Investing Made Easy
Is now a good time to invest?
This is the wrong question. The better question to ask would be “What is a good time to invest?”
It is not always a good time to invest. Before buying stocks, it is important that you do your research and have a clear purpose for investing in the first place. Once you know why you are investing, then it will be easier to answer when now might actually be a good time.
What are your goals for investing in stocks?
Are you looking to make extra money?
Do you enjoy learning about the fundamentals of your favorite companies?
Do you have the time to invest to learn about investing in stocks and executing trades?
The desire to increase your investment accounts and net worth appealing?
If you answered yes, then you are ready to start investing in stocks.
If you said no, then stick to consistently investing in EFTs or mutual funds. That is still a solid investing strategy!
The bottom line is whether you are ready to invest. The stock market will continue to do its thing whether you choose to participate or not.
Why does the stock market just keep going up?
The stock market has been steadily climbing for the long trend.
As a result, it’s important to be aware of the factors that influence how much you can profit from stocks. This includes understanding what drives stock prices and when these markets are likely to go up or down.
The reality is that there is no such thing as an “always” in investing — there will always be downturns at some point for any market, but those dips won’t last forever either.
As history proves, the stock market over time will keep going up.
Why has the stock market dropped?
This is the #1 reason why most people are terrified of investing in the stock market.
The fear of the stock market dropping and losing money. Or maybe they were burned in the previous market corrections in 2001 or 2008.
Typically, the stock market has dropped because of the following:
The global economy is going through a rough patch.
There is fear that the US may be headed for another recession.
The US is experiencing inflation that has caused the Federal Reserve to raise interest rates.
In other words, investors are uncertain about the future of the global economy and are afraid of a recession in the US, which will have a significant impact on the stock market.
Just remember, the S&P 500 has come back each time after posting a year or two of negative returns.
However, you can still make money as an investor when the market goes down! Learn how to ride that elevator up and down.
What are the best times to trade stocks?
Ask a few different investment gurus and you are likely to get a variety of answers such as:
It is best to trade stocks when the market is down and on a day with low volume. This way, you are less likely to be hit with volatility that could cause your profits to drop.
The best times to trade stocks are when the market is stable, meaning that there are few fluctuations in price. The most optimal time to enter and exit the market is during a period of low volatility.
The best time to trade stocks is when the market is at an all-time high. (very wrong idea, so don’t try this one)
Traders should try and stay away from markets when volatility or uncertainty is high.
It is important to understand the best times for trading stocks in order to maximize profits.
Overall, your trading plan will tell you the best time for you to trade stocks. Over time with practice in a simulated account, you will be aware of the best times for trading.
Your best times will be different than mine; they will vary for all of us and that is okay. We all view the stock market and read charts in our own way.
Best Stocks to Buy Right Now
What are the stocks to invest in right now? Should you buy stocks now?
Well, first of all, I am not an advisor telling you what to invest in. You are responsible for doing your due diligence.
The best stocks to buy are the stocks that you understand the best– YOUR Watchlist!
Typically, that means following 10 stock tickers and learning everything you can about how those stocks move.
Other investing gurus may tell you the best stock to buy is one that has a low price-to-earnings ratio. This is because the company has room for growth, and they are more than likely not overvalued in the market. They look for industries that are experiencing either a slowdown or an increase in competition.
Personally, I like to stick with strong, healthy companies to buy.
Many times the best stocks to buy right now are growth stocks, which have been very successful in 2021. These types of companies grow rapidly and offer significant returns on investment in a short period time frame.
What are the best stocks to buy now or put on a watchlist? These are the most popular stocks investors tend to follow:
Apple (Nasdaq: AAPL)
Advanced Microdevices (Nasdaq: AMD)
Amazon (Nasdaq: AMZN)
Meta / Facebook (Nasdaq: FB)
Nvidia (Nasdaq: NVDA)
Tesla (Nasdaq: TSLA)
More Best Stocks to Buy
When you invest in these stocks as an investor, it is important that you look for them during their good moments so that your investments will increase significantly over time and always have risk management strategies in place (BEFORE YOU ENTER THE TRADE).
Can You Afford to Buy Stocks?
There are a lot of factors that go into determining the best time for someone to begin investing or trading stocks.
The most important aspect is whether or not you have enough money at your disposal, which can be determined by your personal financial situation.
Other factors that may play a role in determining the best time to trade are whether or not the person trading has a specific investment objective, and if they have a time-sensitive need.
You need to know your long-term goals for buying stocks.
Are you buying stocks as a long-term investor or if you are buying stocks for income?
Either way, you need a solid idea of how to plan to manage your risk and maximize your profit. That is why investing in stocks is so enticing for so many traders.
Read Now: How Fast Can You Make Money in Stocks?
So, should you buy stocks now?
The current market conditions are a great time to buy or short-sell stocks.
However, there are many trading mistakes when investors place a trade.
Whether we are experiencing a bull run or heading into a bear market, there is always money to be made in the stock market. You should not question yourself is it time to buy stocks.
Regardless, you must invest the money in a solid investing education. That is non-negotiable.
If you want to go out and start buying stocks without investing knowledge, that is fine. Just do not complain if you lose more money than the only investing course I recommend. Check out my Trade and Travel review.
You must do your own due diligence when investing in stocks and finding a good time to buy stocks.
This is your investing journey!
Your journey will be different than my investing journey. That is okay because we each will find our niche and how we like to trade stocks.
Back to the original question, is now a good time to buy stocks?
Overall, you must look for the best companies to invest in. That will make you successful at investing.
Know someone else that needs this, too? Then, please share!!
Did the post resonate with you?
More importantly, did I answer the questions you have about this topic? Let me know in the comments if I can help in some other way!
Your comments are not just welcomed; they’re an integral part of our community. Let’s continue the conversation and explore how these ideas align with your journey towards Money Bliss.