Frankly, however, the biggest surprise at the moment might be that sales volumes have held up pretty well over the past few weeks even as mortgage rates have climbed into the mid-7s. We’ve been talking about sales growth over the past year. More home sales are happening, but we can also see — once adjusted for seasonal patterns — that sales should be much higher now if a real market recovery were underway.
It feels like the latest macro trends will keep mortgage rates in the mid-7% range for the near term. And we’d expect that to slow home sales further. That’s why Altos Research tracks every home for sale in the country each week. The data so often defies expectations or changes very quickly. Let’s dig further into the details of the U.S. housing market for the week of April 22.
Housing inventory
When we look at the active inventory of unsold homes on the market, we can definitely see the impact of higher mortgage rates in the past month. There are 543,000 single-family homes on the market now. That’s a 3% jump from last week and 31% above year-ago levels.
The available inventory of unsold homes on the market is building quickly due to the most recent mortgage rate jumps. There are 130,000 more homes on the market now than last year at this time.
Normally, inventory is climbing at this point in the second quarter. We’re rapidly approaching the peak of the market in terms of seller listings, and as inventory builds, the sales rate will peak by the end of June. So, it’s normal that inventory is growing now.
But when you add a spike in mortgage rates that makes homebuying less affordable, that leads to fewer buyers and inventory grows. Altos data currently shows an inflection point in April. With the most recent mortgage rate jump, inventory growth has also accelerated.
This is what is meant when we say that higher rates leads to higher inventory. We are on the path back to the formerly normal levels of unsold homes on the market. A couple more years with elevated rates will get us there.
But it’s also noteworthy to point out that falling rates reverse this trend. Lower rates mean that people snap up the existing inventory.
New listings
Growing inventory is not just about slowing demand. We are also consistently measuring more sellers coming back into the market. At 69,000 new listings unsold today, that’s 3% more than a week ago and 14% more than this time last year.
In fact, there are more new sellers this week than in any week of 2023. This selling season still has two more months of growth potential. Industry professionals would love to see 70,000 or 80,000 new listings per week in May. More sellers means more sales can happen. There’s a limit, of course, as we could eventually reach an imbalance if too many sellers flood the market and too few buyers follow suit. But we’re not close to that yet.
In the years before the COVID-19 pandemic, the latter half of April would normally see 80,000 to 100,000 new listings in a week. Now we’re at 69,000. Obviously, elevated mortgage rates slows both buyer and seller activity. There are a lot of people who will never sell their house with a 3% mortgage.
There’s unlikely to be a flood of sellers in the next few years, but we can see steady growth. Each year with higher rates will create more inventory growth and have fewer people locked into low rates. That growth is good for the market.
The available inventory of homes to buy and the new ones being listed for sale each week are what consumers care about. If I’m buying a house, do I have any houses to buy? For homebuyers, the selection they have now is the most they’ve had in years.
Real estate professionals, on the other hand, have to care about transaction volume. How many home sales are happening? Because there were so few sellers last year, the number of sales was quite constricted. That’s starting to change. The 14% increase in new listings over the past year is a really good sign that sales can grow.
Pending sales
When we look at the sales rate, we can indeed see that home sales are growing. There were 71,000 new contracts started for single-family homes this week. That’s 3% more than last week and 7% more than a year ago.
There are still 8% fewer sales happening each week than in 2022. At that time two years ago, there were frantic last-minute deals getting done as mortgage rates were rising quickly. So, even though rates were up back then, sales were still strong.
But the hectic pandemic-era pace of sales had slowed, so inventory was building quickly. In 2022, the new sales rates really cratered after the Fourth of July holiday.
There are now 385,000 single-family homes under contract. That’s 5% growth compared to this time last year but is still 14% less than two years ago. New sales started this week saw 7% growth while the total number of homes under contract saw 5% growth.
It takes 30 to 40 days for the typical sale to close. The homes under contract now will mostly close in April and May. The 5% annualized growth rate is less than we’d hoped for at the start of the year, but it’s creeping up even with higher mortgage rates.
Altos Research uses direct measurement rather than seasonally adjusting its numbers. There are 385,000 single-family homes in escrow to complete a sale as of today. If you were to approximate a seasonal adjustment on this number, you would see a yearly sales pace of about 4.4 million units for April 2024. That pace is up from April 2023, but it is still running slower than the typical April. The seasonal pace is where one can observe the slowdown due higher mortgage rates.
The takeaway from the weekly new pending sales data is that even though sales continue to outpace last year, that growth has definitely slowed.
Home prices
The median price of single-family homes under contract is now $398,000. That jumped by 2.4% jump this week and is, in fact, a new all-time-high, surpassing the sale prices of two years ago.
These spring weeks are indeed the time when home prices climb, so it’s not too surprising that this trend is occurring now. But we’ve also been keeping a close eye on home prices in the face of these rising mortgage rates.
The prices of the homes going under contract are 6% more expensive than one year ago. Last year at this time, home prices were lower than in April 2022. But we’re now back at all-time highs. The previous peak was $395,000 two years ago.
One thing of interest in the price data is how slow this climb has been. Compared to Jan. 1, 2024, prices are up 6.6%. In most years, the increase is closer to 10% by this time in April. So, as a leading indicator for how the year ends up, this price signal is much softer than usual.
We can also see this in asking prices. The median price for all homes currently on the market is $449,000. That’s up a fraction from last week and only 1% above last year at this time.
Asking prices can be thought of as a leading indicator for future sales prices. Homes that are on the market now will get offers in May, close in June and will be reported on in July. So, the future signals for home prices aren’t falling because of higher mortgage rates, but it certainly looks like price appreciation has slowed.
Price reductions
Another strong leading indicator for future home sale prices is the share of homes on the market with price reductions. If more sellers have to cut their prices now, that’s a real signal for sales that will happen in the future.
Surprisingly, given the mortgage rate changes, there is no jump yet in the share of price reductions. We’ve been watching this stat closely.
This week, 32% of the homes on the market have taken a price cut. That’s actually down a fraction from last week, given a relatively strong set of new listings that hit the market and the fact that home sales are at their highest point of the year. Fresh inventory doesn’t take a price cut until after it sits for a while without an offer.
There are 3% more homes with price reductions today than a year ago. Last year at this time, price cuts were still decreasing with very tight volumes of new listings. There are more homes on the market now with price cuts than in any April on record. That shows weakness in prices, but it’s not a super high number and it’s not skyrocketing, so that implies we won’t see prices tanking anytime soon.
The takeaway here is that with the 30-year fixed mortgage at 7.4%, there is still just enough sales volume to keep home prices from dropping like they did in late 2022. The current market is not changing nearly that quickly. We’ll continue to watch data on price cuts. As mortgage rates make homes less affordable, fewer offers will be made and some sellers will cut their prices. That could accelerate in the next few weeks.
Wire fraud prevention firm CertifID and big four title firm Old Republic have entered into a strategic agreement to prevent mortgage payoff fraud, according to an announcement on Thursday.
Mortgage payoff fraud occurs when a title company mistakenly sends payoff funds to a fraudulent bank account after receiving wire instructions that appear to be from the mortgage servicer. The instructions, however, are actually from fraudsters.
“Old Republic Title continues to focus on innovation to enable the success of our direct and agency operations,” Carolyn Monroe, the president and CEO of Old Republic National Title Holding Co., said in a statement. “We are excited to leverage the comprehensive approach to fraud prevention that CertifID provides, inclusive of software, insurance, and recovery and support services, to help prevent fraud and create the best experiences for our agents and customers, and all parties involved in real estate transactions.”
Although fewer home sale transactions closed in 2023, fraudsters continued to be active, with the FBI reporting that fraud loss in the real estate sector reached $446 million in 2023.
Data from CertifID shows that mortgage payoff fraud has become the largest source of losses among title firms, with the median loss coming in at $257,000 in 2023. Additionally, a study by the American Land Title Association found that roughly 17% of title companies have sent money to an incorrect account due to fraud, and 49% of those organizations have done so more than once.
In a statement, CertifID CEO Tyler Adams said that he applauds Old Republic for taking the initiative to help reduce the risk of mortgage payoff fraud.
“We look forward to working together to truly solve the issue of payoff fraud seen across the industry,” Adams added.
In 2023, Old Republic’s title segment reported net fee and premium earnings of $2.563 billion, down 33.2% compared to 2022, and a pretax income of $133.5 million, a drop of 56.7%.
A post-occupancy agreement, also known as a post-closing possession agreement, allows the seller to remain in the property they just sold to the buyer for a set period after closing. This can be a win-win for both parties in some situations, but it comes with major risks for the buyers. I have personally bought many houses with post-occupancy agreements and some worked out great while others ended in a costly eviction. A post-occupancy agreement may be needed in some cases but as a regular home buyer, I would be very careful ever accepting one.
Table of Contents
What is a post-occupancy agreement?
In a typical home sale transaction, the seller and buyer agree to a closing date and time, and possession of the home transfers when that closing takes place. The sellers bring the keys and hand them to the buyers if they are both at closing. Or the buyers can pick up the keys or their agent can give them the keys if both parties are not at the closing table (my preference).
In some cases, a seller may want extra time to move out after closing. They may be waiting for their new house to close, or for a house to be built, or they might just want more time to move. This sounds like a reasonable request for the seller but it can come with major risks for the buyer. This is why I try to avoid post-occupancy agreements if possible.
The video below was a nightmare after a post-occupancy agreement went bad:
What are the risks of a post-occupancy agreement?
Many people have heard the stories on the news of a seller who will not move out of their home are they sell. Almost all of these situations come from post-occupancy agreements. During a typical sale, the buyer does a walk-through of the home to make sure it is clean, all the seller’s stuff is moved out, and the property is in the same condition as when they put a contract on it (unless the contract says otherwise). If there is anything wrong, the buyer can delay or even not buy the home.
When the seller is still living in the home and the buyer closes on it (completes the purchase), they cannot make sure it is clean, all the seller’s stuff is gone, or the seller is out. Some sellers want the money that is in their home but want to stay! If the seller does not leave after a post-occupancy agreement, the buyer cannot simply kick them out, they must go to court and evict them.
An eviction can take months or even years in some states like New York.
Why do I agree to post-occupancy agreements?
I am a real estate investor who works hard to get the best deals I can. I buy a lot of distressed properties that need work and many sellers have unique situations. I also buy from many wholesalers who make deals with sellers that I must agree to. In a perfect world, I would never do a post-occupancy agreement but in some cases, it is a take-it-or-leave-it situation and the deal is good enough for me to take the risk.
I would estimate I have some kind of problem with 30 percent of the post-occupancy agreements I do. For me, it is not as big of a problem as it can be for inexperienced homeowners or people who need to move into the home. I also have a YouTube channel that helps me recoup some of my losses with the crazy situations that occur. I also know how to handle evictions, squatters, and other situations where someone not as experienced could be completely lost on what to do.
How should a post-occupancy agreement be structured
There are also risks with how post-occupancy agreements are structured. Some people just agree to let the seller stay and maybe pay a little rent. The problem with this is there is no motivation for them to move out. When we do a post-occupancy agreement we try to make it painful if the seller does not hold up to their obligations and move.
The post-occupancy agreement should always be in writing and money should be held back in escrow from the seller proceeds. I like to hold back at least $10,000 on houses below $400k and if they do not move by a certain date, I get that $10,000 as the buyer. That may seem like a lot but an eviction and a few months of house payments can eat through that very fast. If you are buying a more expensive home, I would hold back much more.
I have seen many agreements that can be wishy-washy and not work out for either party. Some will charge a per diem if the seller does not move like $200 a day. It can be confusing when they are officially out, and when the dates officially start and proving when they are out. I have seen some people create a lease with rent charged and a deposit. You have to be very careful with this as many states have laws on how much the deposit can be compared to rent, how a deposit is paid back or kept, and the rights of the tenant after the lease is started. It is usually easier to evict a seller who does not move than a tenant with a lease.
Another crazy situation:
Should you agree to a post-occupancy agreement?
If you are a regular home buyer looking for a place to move into, be very careful agreeing to a post-occupancy agreement. I would make sure you love that house and have no other options. If you do agree, make sure there is a large enough penalty to make it worthwhile to you if the seller does not move. You also need to make sure your insurance is set up correctly, there is an agreement for who pays for utilities and there is recourse if the house is damaged during the extra time the seller lives there. It also helps if you have a YouTube channel where you can post crazy stories if something goes bad.
Conclusion
I am okay doing post-occupancy agreements if everything is set up correctly and that is my only option. But even as an experienced investor, I try to avoid them if at all possible. If you happen to live in a state with long eviction timelines I would be really careful agreeing to any post-occupancy agreement.
In the heart of the American South, Mississippi exudes a charm and richness deeply rooted in its history, culture, and natural beauty. Known as the “Magnolia State,” it beckons with its lush landscapes, winding rivers, and warm hospitality. Its cities, such as the historic streets of Natchez and the bustling capital of Jackson, offer a blend of Southern charm and contemporary living. In this ApartmentGuide article, we’ll dive into the pros and cons of living in Mississippi, providing insights to help you navigate life in this unique state.
Renting in Mississippi snapshot
1. Pro: Rich cultural heritage
Mississippi’s rich cultural heritage is deeply rooted in its vibrant music scene, including the birthplace of blues and rock ‘n’ roll legends such as B.B. King and Elvis Presley. The state’s literary legacy shines with luminaries like William Faulkner and Eudora Welty, who drew inspiration from its landscapes and people. Additionally, Mississippi’s diverse culinary traditions, blending Southern, Creole, and Native American influences, offer a flavorful tapestry of dishes unique to the region.
2. Con: Weather extremes
Mississippi’s climate can be characterized by its high humidity and frequent thunderstorms, contributing to its reputation for experiencing extreme weather conditions. Tornadoes pose a significant threat, particularly during the spring months, with the state falling within the infamous “Tornado Alley” region of the United States. Moreover, the state is susceptible to tropical storms and hurricanes, which can bring heavy rainfall, flooding, and strong winds, impacting communities along the Gulf Coast.
3. Pro: Affordable cost of living
With one of the lowest costs of living in the United States, Mississippi offers an appealing choice for those seeking to maximize their budget. Housing, groceries, and utilities come at notably lower prices compared to the national average. Even in Jackson, the state’s largest city, living expenses remain significantly more affordable, with a median home sale price of $85,000 and a one-bedroom apartment renting for $900.
4. Con: Limited job opportunities
Limited job opportunities in Mississippi can present challenges for residents seeking employment, particularly in certain industries and rural areas. The state’s economy is heavily reliant on sectors such as agriculture, manufacturing, and healthcare, which may not always offer a wide range of career options.
5. Pro: Natural beauty and outdoor activities
With picturesque landscapes ranging from lush forests to serene rivers and expansive coastlines along the Gulf of Mexico, there’s a lot to uncover in Mississippi. Outdoor enthusiasts can enjoy a plethora of recreational activities, including hiking, fishing, boating, and birdwatching in the state’s numerous parks, wildlife refuges, and scenic trails. The diverse ecosystems provide opportunities for residents to immerse themselves in nature and enjoy a fulfilling lifestyle.
6. Con: Limited public transportation
Mississippi’s public transportation infrastructure is relatively limited, with many areas relying heavily on personal vehicles for transportation. The city of Jackson may have bus systems, but the transit score is 18, meaning coverage can be sparse and schedules infrequent compared to more densely populated areas.
7. Pro: Warm community and hospitality
Mississippi’s reputation for warm hospitality and friendly communities extends beyond mere politeness; it embodies a genuine sense of belonging. Whether it’s sharing a meal with neighbors, participating in local events, or simply striking up a conversation, the welcoming atmosphere in Mississippi creates strong bonds and lasting friendships.
8. Con: Heat and humidity
Mississippi’s climate is characterized by its high temperatures and humidity, particularly during the summer months, often leading to sweltering conditions. With average summer highs in the upper 80s to low 90s Fahrenheit and humidity levels frequently exceeding 70%, the oppressive heat can be challenging to endure.
9. Pro: Vibrant culinary scene
Mississippi’s culinary scene is a delight, featuring soul food, seafood, and barbecue. The state’s rich agricultural heritage influences its cuisine, with local specialties like catfish, sweet potatoes, and pecan pie celebrated in local eateries and festivals like the Crawfish Cook-Off.
10. Con: Infrastructure concerns
Mississippi’s infrastructure confronts significant hurdles, encompassing aging roads and bridges alongside sparse public transportation networks. Particularly in rural regions, the shortcomings in infrastructure can lead to insufficient access to critical services such as healthcare and education. Reflecting these concerns, Mississippi received a discouraging D+ grade on its 2020 infrastructure report card.
11. Pro: Historic architecture
Mississippi is adorned with an array of historic architecture, such as the picturesque Victorian homes of the Columbus Historic District, and the grandeur of the Old Capitol Museum in Jackson, a stunning example of Greek Revival architecture. These iconic structures stand as enduring symbols of Mississippi’s rich history and cultural legacy, inviting visitors to step back in time and marvel at the architectural craftsmanship of eras gone by.
12. Con: Mosquitoes and ticks
Mississippi’s warm and humid climate creates an ideal environment for various insects, including mosquitoes and ticks, which can be a nuisance for residents. During the summer months, swarms of mosquitoes can make outdoor activities uncomfortable, while encounters with ticks pose potential health risks. You’ll want to take the necessary precautions when moving to this state.
Methodology : The population data is from the United States Census Bureau, walkable cities are from Walk Score, and rental data is from ApartmentGuide.
Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors’ opinions or evaluations.
As we head into peak home-buying season, signs of life have begun to spring up in the housing market.
Even so, still-high mortgage rates and home prices amid historically low housing stock continue to put homeownership out of reach for many.
Moreover, the National Association of Realtors agreed to a monumental $418 million settlement on March 15 following a verdict favoring home sellers in a class action lawsuit. Still subject to court approval, the settlement requires changes to broker commissions that will upend the buying and selling model that has been in place for years.
Housing Market Forecast for 2024
Elevated mortgage rates, out-of-reach home prices and record-low housing stock are the perennial weeds that experts say hopeful home buyers can expect to contend with this spring—and beyond.
“The housing market is likely to continue to face the dual affordability constraints of high home prices and elevated interest rates in 2024,” said Doug Duncan, senior vice president and chief economist at Fannie Mae, in an emailed statement. “Hotter-than-expected inflation data and strong payroll numbers are likely to apply more upward pressure to mortgage rates this year than we’d previously forecast.”
Despite ongoing affordability hurdles, Fannie Mae forecasts an increase in home sales transactions compared to last year. Experts also anticipate a slower rise in home prices this year compared to recent years, but price fluctuations will continue to vary regionally and depend strongly on local market supply.
U.S. home prices declined in January for the third consecutive month due to high borrowing costs, according to the latest S&P CoreLogic Case-Shiller Home Price Index. But prices year-over-year jumped 6%—the fastest annual rate since 2022.
Chief economist at First American Financial Corporation Mark Fleming predicts a “flat stretch” ahead.
“If the 2020-2021 housing market was too hot, then the 2023 market was probably too cold, but 2024 won’t yet be just right,” Fleming said in his 2024 forecast.
Will the Housing Market Finally Recover in 2024?
For a housing recovery to occur, several conditions must unfold.
“For the best possible outcome, we’d first need to see inventories of homes for sale turn considerably higher,” says Keith Gumbinger, vice president at online mortgage company HSH.com. “This additional inventory, in turn, would ease the upward pressure on home prices, leveling them off or perhaps helping them to settle back somewhat from peak or near-peak levels.”
And, of course, mortgage rates would need to cool off—which experts say is imminent despite rates edging back up toward 7%. For the week ending April 11, the 30-year fixed mortgage rate stood at 6.88%, according to Freddie Mac.
However, when mortgage rates finally go on the descent, Gumbinger says don’t hope they cool too quickly. Rapidly falling rates could create a surge of demand that wipes away any inventory gains, causing home prices to rebound.
“Better that rate reductions happen at a metered pace, incrementally improving buyer opportunities over a stretch of time, rather than all at once,” Gumbinger says.
He adds that mortgage rates returning to a more “normal” upper 4% to lower 5% range would also help the housing market, over time, return to 2014-2019 levels. Yet, Gumbinger predicts it could be a while before we return to those rates.
Nonetheless, Kuba Jewgieniew, CEO of Realty ONE Group, a real estate brokerage company, is optimistic about a recovery this year.
“[W]e’re definitely looking forward to a better housing market in 2024 as interest rates start to settle around 6% or even lower,” says Jewgieniew.
NAR Settlement Rocks the Residential Real Estate Industry
Following years of litigation, the National Association of Realtors (NAR) has agreed to pay $418 million to settle a series of antitrust lawsuits filed in 2019 on behalf of home sellers.
The plaintiffs claimed that the leading national trade association for real estate brokers and agents “conspired to require home sellers to pay the broker representing the buyer of their homes in violation of federal antitrust law.”
Though the landmark settlement is subject to court approval, most consider it a done deal.
The settlement requires NAR to enact new rules, including prohibiting offers of broker compensation on multiple listing services (MLS), the private databases that allow local real estate brokers to publish and share information about residential property listings. The rule is set to take effect in mid-July, once the settlement receives judge approval.
Moreover, sellers will no longer be required to pay buyer broker commissions and real estate agents participating in the MLS must establish written representation agreements with their buyer clients.
NAR denies any wrongdoing and maintains that its current policies benefit buyers and sellers. The organization believes it’s not liable for seller claims related to broker commissions, stating that it has never set commissions and that commissions have always been negotiable.
How Will the New Rules Impact the Buying and Selling Process?
Per the settlement’s terms, the costs associated with buying and selling a home are set to change dramatically.
“The primary things that will change are the decoupling of the seller commission and the buyer commission in the MLS,” says Rita Gibbs, a Realtor at Realty One Group Integrity in Tucson. “It’s gonna cause some chaos.”
While sellers will no longer be able to offer broker compensation in the MLS, there’s no rule prohibiting off-MLS negotiations. Because of this, Gibbs suspects buyers and sellers will continue offering broker compensation off the MLS.
The Department of Justice confirmed it will permit listing brokers to display compensation details on their websites. However, buyer agents will need to undergo the tedious task of visiting countless broker websites to find who’s offering what.
Michael Gorkowski, a Virginia-based real estate agent with Compass, is also trying to figure out how to manage the potential ruling.
“We often work with buyers for many months and sometimes years before they find exactly what they’re looking for,” Gorkowski says. “So in a case where a seller isn’t offering a co-broker commission, we will have to negotiate that the buyer pays an agreed-upon commission prior to starting their search.”
The Changes Will Impact These Home Buyers Most
“In the short term, it is absolutely going to injure buyers, especially FHA and VA buyers,” Gibbs says. “With rare exception, these buyers are not in a position to pay for their own agent.”
Gibbs says that if sellers don’t offer compensation, many buyers who can’t otherwise afford to pay a broker will choose to go unrepresented.
Gorkowski notes that veterans taking out VA loans face a unique challenge under the new rules. “[P]er the VA requirements, buyers cannot pay so it must be negotiated with the seller for now.”
As a result, NAR is calling on the U.S. Department of Veterans Affairs to revise its policies prohibiting VA buyers from paying broker commissions. Even so, there’s skepticism that the federal government will be able to implement changes in time for the July deadline.
Gibbs and Gorkowski are among the many agents especially concerned about first-time home buyers. After July, first-time and VA buyers will be required to sign a buyer-broker agreement stating that they will compensate their broker—but Gibbs says many won’t have the means to do so.
In this situation, agents would likely only show buyers homes where sellers are offering compensation.
“This is a very troubling situation,” Gorkowski says.
Housing Inventory Forecast for 2024
With many homeowners “locked in” at ultra-low interest rates or unwilling to sell due to high home prices, demand continues to outpace housing supply—and likely will for a while—even as some homeowners may finally be forced to sell due to major life events such as divorce, job changes or a growing family.
“I don’t expect to see a meaningful increase in the supply of existing homes for sale until mortgage rates are back down in the low 5% range, so probably not in 2024,” says Rick Sharga, founder and CEO of CJ Patrick Company, a market intelligence and business advisory firm.
Housing stock remains near historic lows—especially entry-level supply—which has propped up demand and sustained ultra-high home prices. Here’s what the latest home values look like around the country.
Yet, some hopeful housing stock signs have begun to sprout:
Existing inventory is showing signs of loosening as impatient buyers and sellers have begun to accept the reality of mortgage rates oscillating between 6% and 7%.
Home-builder outlook also continues to get sunnier, trending back up amid declining mortgage rates and better building conditions.
The most recent National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), which tracks builder sentiment, saw a fourth consecutive monthly rise, surpassing a crucial threshold with an increase from 48 to 51 in March. A reading of 50 or above means more builders see good conditions ahead for new construction.
At the same time, new single-family building permits ticked up 1% in February—the 13th consecutive monthly increase—according to the latest data from the U.S. Census Bureau and U.S. Department of Housing and Urban Development (HUD).
Residential Real Estate Stats: Existing, New and Pending Home Sales
Though some housing market data indicates signs of growth are in store this spring home-buying season, persistently high mortgage rates may hinder activity from fully flourishing.
Here’s what the latest home sales data has to say.
Existing-Home Sales
Existing-home sales came to life in February, shooting up 9.5% from the month before, according to the latest data from the NAR. Sales dipped 3.3% from a year ago.
Experts attribute the monthly jump to a bump in inventory.
“Additional housing supply is helping to satisfy market demand,” said Lawrence Yun, chief economist at NAR, in the report.
Existing inventory rose 5.9%—logging 1.07 million unsold homes at the end of February. However, there are still only 2.9 months of inventory at the current sales pace. Most experts consider a balanced market falling between four and six months.
Meanwhile, existing home prices continue to soar to unprecedented heights, reaching $384,500, which marks the eighth consecutive month of yearly price increases and a February median home price record.
New Home Sales
Sales of newly constructed single-family houses ticked down by a nominal 0.3% compared to January, but outpaced February 2023 sales by 5.9%, according to the latest U.S. Census Bureau and HUD data.
Amid a high percentage of homeowners still locked in to low mortgage rates, home builders have been picking up the slack.
“New construction continues to be an outsized share of the housing inventory,” said Dr. Lisa Sturtevant, chief economist at Bright MLS, in an emailed statement.
Sturtevant notes that declining new home prices are coming amid a recent trend of builders introducing smaller and more affordable homes to the market.
The median price for a new home in February was $400,500, down 7.6% from a year ago.
Source: U.S. Census Bureau and U.S. Department of Housing and Urban Development
Pending Home Sales
NAR’s Pending Homes Sales Index rose 1.6% in February from the month prior even as mortgage rates approached 7% by the end of the month. Pending transactions declined 7% year-over-year.
A pending home sale marks the point in the home sales transaction when the buyer and seller agree on price and terms. Pending home sales are considered a leading indicator of future closed sales.
The Midwest and South saw monthly transaction gains while the Northeast and West saw declines due to affordability challenges in those higher-cost regions.
“While modest sales growth might not stir excitement, it shows slow and steady progress from the lows of late last year,” said Yun, in the report.
Ongoing Affordability Challenges Could Throw Cold Water on Spring Home-Buying Hopes
Though down from its 2023 high of 7.79%, the average 30-year fixed mortgage rate in 2024 remains well over 6% amid rising home values. As a result, home buyers continue to face affordability challenges.
According to data from its first-quarter 2024 U.S. Home Affordability Report, property data provider Attom found that median-priced single-family homes remain less affordable than the historical average in over 95% of U.S. counties.
For one, the data uncovered that expenses are eating up more than 32% of the average national wage. Common lending guidelines require monthly mortgage payments, property taxes and homeowners insurance to comprise 28% or less of your gross income.
At the same time, home prices and homeownership expenses continue to outpace wage growth.
Consequently, the latest expense-to-wage ratio is hovering at one of the highest points over the past decade, according to the Attom report, despite some slight affordability improvements over the last two quarters.
“Affording a home remains a financial stretch, or a pipe dream, for so many households,” said Rob Barber, CEO at Attom.
Pro Tips for Buyers and Sellers
Here are some expert tips to increase your chances for an optimal outcome in this tight housing market.
Pro Tips for Buying in Today’s Real Estate Market
Hannah Jones, a senior economic research analyst at Realtor.com, offers this expert advice to aspiring buyers:
Know your budget. Instead of focusing on price, figure out how much you can afford as a monthly payment. Your monthly housing payment is influenced by the price of the home, your down payment, mortgage rate, loan term, home insurance and property taxes.
Be flexible about home size and location. Perhaps your budget is sufficient for a small home in your perfect neighborhood, or a larger, newer home further out. Understanding your priorities and having some flexibility can help you move quickly when a suitable home enters the market.
Keep an eye on the market where you hope to buy. Determine the area’s available inventory and price levels. Also, pay attention to how quickly homes sell. Not only will you be tuned in when something great hits the market, you can feel more confident moving forward with purchasing a well-priced home. A real estate agent can help with this.
Don’t be discouraged. Purchasing a home is one of the largest financial decisions you’ll ever make. Approaching the market confidently, armed with good information and grounded expectations will take you far. Don’t let the hustle of the market convince you to buy something that’s not in your budget, or not right for your lifestyle.
Pro Tips for Selling in Today’s Real Estate Market
Gary Ashton, founder of The Ashton Real Estate Group of RE/MAX Advantage, has this expert advice for sellers:
Research comparable home prices in your area. Sellers need to have the most up-to-date pricing intel on comparable homes selling in their market. Know the market competition and price the home competitively. In addition, understand that in some price points it’s a buyer’s market—you’ll need to be prepared to make some concessions.
Make sure your home is in top-notch shape. Homes need to be in great condition to compete and create a strong “online curb appeal.” Well-maintained homes and attractive front yards are major features that buyers look for.
Work with a local real estate agent. A real estate agent or team with a strong local marketing presence and access to major real estate portals can offer significant value and help you land a great deal.
Don’t put off issues that require attention. Prepare the home by making any repairs or improvements. Removing any objections that buyers may see helps focus the buyer on the positive attributes of the home.
Will the Housing Market Crash in 2024?
Despite some areas of the country experiencing monthly price declines, the likelihood of a housing market crash—a rapid drop in unsustainably high home prices due to waning demand—remains low for 2024.
“[T]he record low supply of houses on the market protects against a market crash,” says Tom Hutchens, executive vice president of production at Angel Oak Mortgage Solutions, a non-QM lender.
Moreover, experts point out that today’s homeowners stand on much more secure footing than those coming out of the 2008 financial crisis, with many borrowers having substantial home equity.
“In 2024, I expect we’ll see home appreciation take a step back but not plummet,” says Orphe Divounguy, senior macroeconomist at Zillow Home Loans.
This outlook aligns with what other housing market watchers expect.
“Comerica forecasts that national house prices will rise 2.9% in 2024,” said Bill Adams, chief economist at Comerica Bank, in an emailed statement.
Divounguy also notes that several factors, including Millennials entering their prime home-buying years, wage growth and financial wealth are tailwinds that will sustain housing demand in 2024.
Even so, with fewer homes selling, Dan Hnatkovskyy, co-founder and CEO of NewHomesMate, a marketplace for new construction homes, sees a price collapse within the realm of possibility, especially in markets where real estate investors scooped up numerous properties.
“If something pushes that over the edge, the consequences could be severe,” said Hnatkovskyy, in an emailed statement.
Will Foreclosures Increase in 2024?
In February, total foreclosure filings were down 1% from the previous month but up 8% from a year ago, according to Attom.
“These trends could signify evolving financial landscapes for homeowners, prompting adjustments in market strategies and lending practices,” said Barber, in a report.
Lenders began foreclosure on 22,575 properties in February, up 4% from the previous month and 11% from a year ago. Meanwhile, real estate-owned properties, or REOs, which are homes unsold at foreclosure auctions and taken over by lenders, spiked year-over-year in three states: South Carolina (up 51%), Missouri (up 50%) and Pennsylvania (up 46%).
Despite foreclosure activity trending up nationally and certain areas of the country seeing notable annual increases in REOs, experts generally don’t expect to see a wave of foreclosures in 2024.
“Foreclosure activity is still only at about 60% of pre-pandemic levels … and isn’t likely to be back to 2019 numbers until sometime in mid-to-late 2024,” says Sharga.
The biggest reasons for this, Sharga explains, are the strength of the economy—we’re still seeing low unemployment and steady wage growth—along with excellent loan quality.
Massive home price growth in homeowner equity over the past few years has also helped reduce foreclosures.
Sharga says that some 80% of today’s homeowners have more than 20% equity in their property. So, while there may be more foreclosure starts in 2024—due in part to Covid-era mortgage relief programs phasing out—foreclosure auctions and lender repossessions should remain below 2019 levels.
When Will Be the Best Time To Buy a Home in 2024?
Buying a house—in any market—is a highly personal decision. Because homes represent the largest single purchase most people will make in their lifetime, it’s crucial to be in a solid financial position before diving in.
Use a mortgage calculator to estimate your monthly housing costs based on your down. But if you’re trying to predict what might happen next year, experts say this is probably not the best home-buying strategy.
“The housing market—like so many other markets—is almost impossible to time,“ Divounguy says. “The best time for prospective buyers is when they find a home that they like, that meets their family’s current and foreseeable needs and that they can afford.”
Gumbinger agrees it’s hard to tell would-be homeowners to wait for better conditions.
“More often, it seems the case that home prices generally keep rising, so the goalposts for amassing a down payment keep moving, and there’s no guarantee that tomorrow’s conditions will be all that much better in the aggregate than today’s.”
Divounguy says “getting on the housing ladder” is worthwhile to begin building equity and net worth.
Frequently Asked Questions (FAQs)
Will declining mortgage rates cause home prices to rise?
Declining mortgage rates will likely incentivize would-be buyers anxious to own a home to jump into the market. Expect this increased demand amid today’s tight housing supply to put upward pressure on home prices.
What will happen if the housing market crashes?
Most experts do not expect a housing market crash in 2024 since many homeowners have built up significant equity in their homes. The issue is primarily an affordability crisis. High interest rates and inflated home values have made purchasing a home challenging for first-time homebuyers.
Is it smart to buy real estate before a recession?
If you’re in a financial position to buy a home you plan to live in for the long term, it won’t matter when you buy it because you will live in it through economic highs and lows. However, if you are looking to buy real estate as a short-term investment, it will come with more risk if you buy at the height before a recession.
Homebuying demand also showed signs of softening. Home tours were up 15% compared to the start of the year, a slower increase than the 21% seen at the same time in 2023. Mortgage purchase applications remained flat for the week. Additionally, pending home sales dropped 2.8% year-over-year and unexpectedly declined during the last week of … [Read more…]
This ApartmentGuide article takes you through the pros and cons of living in Virginia, where renters enjoy access to some of the state’s most walkable neighborhoods, alongside charming living options. Whether you’re drawn to the charm of the cobblestone streets of Lynchburg or the ease of urban living in Alexandria, Virginia offers something for everyone. However, every state has its drawbacks, so get ready to explore what “Old Dominion” is all about.
Renting in Virginia snapshot
1. Pro: Rich historical sites
Virginia’s landscape is dotted with pivotal historical sites that offer a deep dive into America’s past. From the Jamestown Settlement, the first permanent English settlement in the Americas, to the historic battlefields of the Civil War, residents and visitors alike have the unique opportunity to walk through history.
2. Con: High pollen allergies
Virginia’s diverse climate contributes to a high pollen count, especially during the spring and fall. This can be particularly challenging for residents with allergies, as cities like Richmond and Virginia Beach often rank high in the lists of worst cities for allergy sufferers with top allergens being maple, juniper and birch trees.
3. Pro: Diverse climate
The state enjoys a diverse climate, offering residents a taste of all four seasons. From the warm, sandy beaches of Virginia Beach in the summer to the snow-covered mountains of the Shenandoah Valley in winter, Virginia provides a variety of environments to enjoy year-round.
4. Con: Traffic congestion
Northern Virginia, particularly the areas surrounding Washington D.C., is notorious for its traffic congestion, with major highways such as Interstate 495 and Interstate 66 experiencing heavy traffic during rush hours. Commuters can expect long delays on these routes, making it one of the more challenging aspects of living in this otherwise picturesque state.
5. Pro: Culinary scene
Virginia’s culinary scene boasts a mix of flavors, drawing inspiration from its diverse cultural heritage and bountiful agricultural resources. From the iconic Chesapeake Bay blue crabs to the savory Southern barbecue of Richmond’s renowned joints, Virginia offers a delectable array of regional specialties.
6. Con: High cost of living in some regions
While Virginia offers many benefits, the cost of living in certain areas, especially Northern Virginia, can be quite high. This includes housing, healthcare, and transportation, making it a significant consideration for anyone planning to move to the state. Take Alexandria for example, where the median home sale price is $653,750 and the average rent for a one-bedroom is $2,065. These high costs can be challenging for those on a budget.
7. Pro: Outdoor activities
With its vast natural landscapes, Virginia is a haven for outdoor enthusiasts. The Appalachian Trail offers hiking opportunities, while the Chesapeake Bay is perfect for boating and fishing. The state’s parks and recreation areas provide countless ways to enjoy the great outdoors.
8. Con: High humidity
Virginia experiences high humidity levels, especially during the summer months, due to its coastal location and proximity to the Chesapeake Bay and Atlantic Ocean. The humid conditions can often lead to discomfort, with residents facing sticky and muggy weather that exacerbates the feeling of heat.
9. Pro: Proximity to Washington D.C
The proximity to Washington D.C. provides residents of Virginia with access to a plethora of career opportunities, cultural attractions, and political institutions. Moreover, residents can enjoy the diverse array of museums, theaters, restaurants, and entertainment options that Washington D.C. has to offer, enriching their overall quality of life.
10. Con: Hurricane risk
Being on the Atlantic coast, Virginia is susceptible to hurricanes and tropical storms, particularly in the late summer and fall. Coastal areas are most at risk, requiring residents to have emergency plans in place and sometimes leading to evacuations.
11. Pro: Strong job market
Virginia boasts a strong job market, particularly in sectors like technology, defense, and government contracting. The presence of the Pentagon and numerous military bases provides stability and opportunities for those in the defense sector and beyond. Additionally, the state’s proximity to Washington D.C. offers access to a wide range of government agencies, consulting firms, and non-profit organizations.
12. Con: Environmental degradation:
Rapid urbanization and industrial development in certain areas of Virginia contribute to environmental degradation, including air and water pollution, habitat loss, and deforestation, which can harm ecosystems and wildlife. For example, the expansion of industrial facilities along the James River in Richmond has led to increased water pollution and habitat destruction.
Methodology : The population data is from the United States Census Bureau, walkable cities are from Walk Score, and rental data is from ApartmentGuide.
From the lush greenery of its forests to the towering peaks of the Cascade Range and the serene waters of the Puget Sound, Washington offers a plethora of scenic wonders to its residents. Home to bustling urban centers like Seattle and Tacoma, as well as charming smaller communities, Washington presents a spectrum of lifestyles to suit a variety of preferences. However, like any area, living in Washington comes with its own set of advantages and disadvantages. In this ApartmentGuide article, we will explore the pros and cons of living in Washington.
Renting in Washington snapshot
Population
8,000,000
Avg. studio rent
$1,489 per month
Avg. one-bedroom rent
$1,790 per month
Avg. two-bedroom rent
$2,017 per month
Most affordable cities to rent in Washington
Pullman, Yakima, Cheney
Most walkable cities in Washington
Seattle, Tacoma, Lynnwood
1. Pro: Food lovers’ paradise
Washington is a food lovers’ paradise, with a diverse culinary scene that celebrates locally sourced ingredients and international flavors. From farm-to-table restaurants in the fertile valleys of eastern Washington to seafood markets along the Pacific coast, the state offers a tantalizing array of dining options to satisfy every palate. If you’re in the Seattle area, you’ll have to try the iconic Seattle Dog, a hot dog topped with cream cheese.
2. Con: High housing costs
The state’s thriving economy has led to rapid population growth and soaring housing costs, particularly in urban areas. For example, the median home sale price in Seattle is $845,000 and the average rent for a one-bedroom apartment is $2,175. This affordability crisis can make it challenging for many residents moving to popular metros in Washington.
3. Pro: Breathtaking scenery
Washington boasts stunning landscapes, including lush forests like the Hoh Rain Forest, majestic mountains like Mt. Rainier, and picturesque coastlines. The state’s abundance of outdoor recreational opportunities, such as hiking, skiing, and kayaking, make it a paradise for nature enthusiasts.
4. Con: Traffic congestion in larger cities
Traffic congestion in larger cities of Washington, such as Seattle and Tacoma, can be a significant challenge for commuters, with congested highways and crowded streets leading to long commute times and frustration. For instance, Interstate 5, which runs through Seattle, is notorious for its heavy traffic during peak hours, causing delays for drivers traveling to and from the city center. Additionally, major thoroughfares like Interstate 405 and State Route 520 often experience congestion, particularly during rush hour, impacting the efficiency of transportation networks in the region.
5. Pro: Environmentally conscious
Washington’s commitment to environmental consciousness is exemplified by initiatives such as the Clean Energy Transformation Act, which aims to transition the state to 100% clean electricity by 2045, reducing reliance on fossil fuels and mitigating climate change impacts. Additionally, the state’s extensive network of public parks and protected wilderness areas, including Olympic National Park and Mount Rainier National Park, underscores its dedication to preserving natural habitats and biodiversity for future generations to enjoy.
6. Con: Seasonal Affective Disorder in Western parts of the state
Washington grapples with seasonal affective disorder (SAD) due to its long, gloomy winters especially in the western region characterized by overcast skies and limited sunlight. Residents often combat the effects of SAD by investing in light therapy devices, seeking out indoor activities, or even planning vacations to sunnier destinations during the winter months. Despite these coping strategies, the prevalence of SAD in western Washington can pose a significant challenge to residents’ mental health and overall well-being, detracting from the quality of life in the region.
7. Pro: Cultural and entertainment events
Washington offers a vibrant cultural scene with a diverse range of entertainment events throughout the year. Seattle’s renowned music festivals like Bumbershoot and Capitol Hill Block Party draw crowds with live performances spanning various genres. Additionally, annual events such as the Washington State Fair in Puyallup showcase the state’s rich cultural heritage and provide entertainment for residents and visitors alike.
8. Con: Natural disaster risk
Washington faces natural disaster risks, particularly in seismically active areas such as the Cascadia Subduction Zone, where the potential for major earthquakes and tsunamis exists. Additionally, the state is home to active volcanoes like Mount Rainier and Mount St. Helens, which pose hazards such as volcanic eruptions and lahars.
9. Pro: Access to outdoor recreation
Access to outdoor recreation in Washington is unparalleled, with the state offering a diverse array of natural landscapes and outdoor activities. From hiking in the Enchantments to kayaking around the San Juan Islands, residents have abundant opportunities to explore the great outdoors. Additionally, iconic destinations such as La Push and Mount Rainier National Park provide world-class hiking trails, camping spots, and scenic vistas, attracting outdoor enthusiasts from near and far.
10. Con: High tourism at popular landmarks
High tourism in Washington can pose challenges for residents, leading to overcrowding, traffic congestion, and environmental degradation. For example, iconic attractions like Pike Place Market in Seattle and Mt. Rainier often experience large crowds of visitors, impacting local businesses and residents’ quality of life. Additionally, increased tourism can contribute to rising costs of living and housing prices in popular tourist destinations, making it more difficult for residents to afford housing and maintain a sense of community.
11. Pro: Charming islands
Washington’s islands offer residents a tranquil escape and unique coastal living experience. From the serene landscapes of the San Juan Islands to the rustic charm of Whidbey Island, these idyllic destinations provide opportunities for relaxation, outdoor recreation, and close-knit community living. Residents enjoy breathtaking views of the Puget Sound, abundant wildlife sightings, and a slower pace of life that embodies the essence of Pacific Northwest island living.
12. Con: Limited parking in urban areas
Parking in urban settings in Washington, such as Seattle, is often limited and expensive, with high demand for parking spaces and restricted street parking. Residents may face challenges finding parking near their homes or workplaces, leading to frustration and inconvenience. Additionally, the scarcity of parking options can result in longer commute times and increased reliance on alternative transportation methods, impacting residents’ overall mobility and quality of life.
Methodology : The population data is from the United States Census Bureau, walkable cities are from Walk Score, and rental data is from ApartmentGuide.
Generally, it helps to save up to 20-25% of a house’s sales price. However, factors like geographical location, economic climate, real estate interest rates, and global events will influence how much money you’ll need to buy a house.
Key Takeaways:
An ideal down payment is 20% to 25% of a home’s value.
USDA and VA home loans traditionally don’t require down payments.
If you make a down payment below 20%, you may be required to get private mortgage insurance.
How much money do you need to buy a house? That cost depends on numerous factors like inflation and real estate trends. According to the Census, homes sold for a median price of $420,700 in January 2024.
Thankfully, you don’t need to pay off that amount all at once. A down payment that’s 20% to 25% of a home’s value can help you secure a property. Even if you don’t have the funds to make a sizeable down payment, low and no-down-payment mortgage options are available.
Below, we’ll share our expertise to help you learn all about loans and mortgage options. We’ll also answer several common questions and share helpful tools, like Credit.com’s mortgage calculator.
All Costs Associated with Buying a House
Spend enough time shopping around for houses, and you’ll learn very quickly that a property’s sales price isn’t the only expense you’ll have to pay. Below, we’ll cover down payments, earnest money deposits, and other factors that determine the real cost of a home.
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Down Payments for Different Mortgage Options
According to the United States Census Bureau, 661,000 new homes were sold in January 2023. Most homebuyers don’t pay off their properties in full from the get-go. Instead, they cover a portion of the home’s cost with a down payment, then gradually pay off the remaining value via monthly mortgage payments.
“How do home mortgage rates work?” and “What types of mortgages am I eligible for?” are common questions for first-time homebuyers.
Below, we’ll discuss four mortgage options and break down how each of them works.
1. Conventional Mortgage
A conventional loan is a mortgage option that’s offered by a private lender instead of the government. Mortgage companies, credit unions, and banks offer conventional loans, though they might require a down payment between 20% and 25% of a property’s sales price.
Lenders might request that you purchase private mortgage insurance (PMI) if your down payment is less than 20%. PMI reimburses lenders if you don’t make your mortgage payments, and borrowers will have to pay for coverage annually.
2. USDA Mortgage
The United States Department of Agriculture (USDA) offers this unique mortgage to borrowers who live in rural areas. A USDA mortgage has no down payment requirement, and its interest rate is very competitive.
To qualify for a USDA loan, you need to:
Buy an eligible property. Your potential home has to be in an eligible rural area.
Meet income guidelines. To qualify for a USDA loan, your income can’t exceed a state-specific amount.
Use the home as your primary dwelling. You have to live on the property permanently.
Be a U.S. citizen, a U.S. national, or a qualifying resident alien. Foreign nationals not authorized to remain in the United States can’t get USDA loans.
You’ll also need to meet the lender’s credit requirements. On average, a credit score of 620 or more will qualify you for a government-backed USDA loan.
3. FHA Mortgage
The Federal Housing Administration (FHA) offers this distinct government-backed mortgage. Borrowers can secure an FHA mortgage with a down payment as low as 3.5%.
Borrowers with very low credit scores might be eligible for an FHA loan, at the expense of having more strict loan limits and higher up-front costs.
To get an FHA loan, you need to meet the following requirements:
Primary residence. The house associated with your loan must be your primary residence. You can’t rent it out to others for profit.
FHA maximum limit. FHA loans can only apply to properties within a set price range. In 2024, the maximum FHA loan amount is $498,257 for single-family homes.
Debt-to-income ratio. To qualify for an FHA loan, you must spend a maximum of 43% of your income on housing costs and housing-related debt.
4. VA Home Loans
Veterans Affairs (VA) loans offer low credit requirements and come with no down payment restrictions.
Certain people qualify for VA loans, including:
Service members who’ve served for at least 90 days consecutively.
Veterans who’ve served at least 181 continuous days, depending on their deployment date.
National Guard members with six years of Active Reserve status or 90 consecutive days of active duty service.
Surviving spouses of veterans, including veterans who are missing in action or being held as a prisoner of war (POW).
Earnest Money Deposit
An earnest money deposit is a payment that buyers can place to demonstrate how serious they are about obtaining a property. Earnest money deposits are normally between 1% and 3% of a property’s sales price. This deposit is not the same as a down payment.
When you make an earnest money deposit, those funds are put into an escrow account. If the seller of a property closes on a deal with you, your earnest money deposit is then added to your down payment. If the seller doesn’t close on the deal with you, it’s possible to regain your earnest money deposit if contingencies are set in place.
Several common contingencies include:
Home inspection contingency: Buyers request to have an inspection conducted on a property. If problems are discovered, buyers can back out of a deal.
Home sale contingency: Buyers who might need to sell their current home can ask for extra time.
Insurance contingency: This is for buyers who may need time to obtain home insurance for a property.
Closing Costs
Closing costs include taxes, appraisals, home inspection costs, title costs, and attorney fees. They’re generally between 3% and 6% of your mortgage principal. Your mortgage principal is the amount you borrow—so the bigger your down payment, the less you’ll pay in closing costs.
Let’s use the $200,000 home above as an example. Consider these three 4% closing cost scenarios:
Your down payment is 10%, or $20,000, leaving a mortgage principal of $180,000. Your closing costs will roughly amount to $7,200.
You offer20%, or $40,000, as your down payment. Your mortgage principal is $160,000, and you’ll pay $6,400 in closing costs.
You apply for a mortgage with no down payment, so your mortgage principal is $200,000. Ultimately, you’ll pay $8,000 in closing costs.
Home-Buying Examples
Next, we’ll show you how to determine your down payment on a home with the previous loans as examples. Let’s imagine your dream home is on the market for $200,000.
Down payments for conventional mortgages are usually $10,000 – $40,000.
USDA mortgages normally don’t require down payments.
An FHA mortgage can cost as little as $7,000.
A VA home loan also doesn’t require a down payment.
USDA and VA home loan mortgage options have the lowest up-front costs for eligible borrowers. An FHA mortgage is less costly than a conventional loan, but interest rates will affect your total payments in the long term.
Financial Resource Ideas
Making a down payment can be challenging because you need a paper trail of your purchases. In most cases, you can’t use borrowed money for a down payment.
Conversely, we know several creative ways to come up with a down payment:
Profits earned from stock or bond sales
Filing for an IRA or 401(k) withdrawal
Paying with money from your checking or savings account
Cash earned from a money market account
Using funds from your retirement account
Monetary gifts
You can roll other funds, like your tax return or a security deposit refund, into your down payment, too.
How Much Money Should I Save Before Buying a House?
It’s important to look at the big picture when buying a house. You’ll need to pull together a down payment and closing costs, but you’ll also need to budget for removal costs, inspections, and repair fees.
A tool like a monthly budget template can put your common expenses into perspective and help you better understand how much house you can afford with your current income.
When Should I Seek Mortgage Relief?
“What happens if I miss a mortgage payment?” is another concern for new and long-time homeowners. First, know that your home won’t immediately be foreclosed on if you miss a payment. Foreclosure usually isn’t imminent unless you’ve missed two or three payments.
If your mortgage payments aren’t within reach, you can contact your lender and explain your specific situation. Seeking forbearance, which is a temporary pause on your payments, can also help you regain your bearings.
Prepare to Buy a Home with Credit.com
Knowing your credit score and understanding the elements that affect it can help you know what you need to do to prepare for loan opportunities.
Sign up for Credit.com’s ExtraCredit® subscription to check out 28 of your FICO® scores. Afterward, visit our mortgage rates page to get additional information.
It’s entirely possible to sell a house with a mortgage. In fact, it’s common to sell a property that still has a mortgage, because most people don’t stay in a home long enough to pay off the home loan.
With the help of your lender and real estate agent, you can move ahead and sell a house with a mortgage. Yes, there’s a bit of paperwork involved, but settling your mortgage at the closing table shouldn’t prove too challenging.
Here’s everything you need to know about selling a home with a mortgage.
What Happens to Your Mortgage When You Sell Your Home?
When you sell your home, the amount you contracted with the buyer is put toward your mortgage and settlement costs before any excess funds are wired to you. Here’s how it works for different transaction types.
A Typical Sale
In a typical sale, homeowners will put their current home on the market before buying another one. Assuming the homeowners have more value in their home than what is owed on their mortgage, they can take the proceeds from the sale of the home and apply that money to the purchase of a new home.
A Short Sale
A short sale is one when you cannot sell the home for what you owe on the mortgage and need to ask the lender to cover the difference (or short).
In a short sale transaction, the mortgage lender and servicer must accept the buyer’s offer before an escrow account can be opened for the sale of the property. This type of mortgage relief transaction can be lengthy (up to 120 days) and involves a lot of paperwork. It’s not common in areas where values are falling or at times when the real estate market is dropping.
When You Buy Another House
There are several roads you can take when you buy another house before selling your own. You may have the option of:
• Holding two mortgages. If your lender approves you for a new mortgage without selling your current home, you may be able to use this option when shopping for a mortgage. However, you won’t be able to use funds from the sale of your current home for the purchase of your next home.
• Including a home sale contingency in your real estate contract. The home sale contingency states that the purchase of the new home depends upon the sale of the old home. In other words, the contract is not binding unless you find a buyer to purchase the old home. The two transactions are often tied together. When the sale of the old home closes, it can immediately fund the down payment and closing costs of the new home (depending on how much there is, of course). Keep in mind that a home sale contingency can make your offer less competitive in a hot real estate market where sellers are not willing to wait around for a buyer’s home to sell.
• Getting a bridge loan. A bridge loan is a short-term loan used to fund the costs of obtaining a new home before selling the old home. The interest rates are usually pretty high, but most homebuyers don’t plan to hold the loan for long.
💡 Quick Tip: You deserve a more zen mortgage. Look for a mortgage lender who’s dedicated to closing your loan on time.
Selling a House With a Mortgage: Step by Step
Here are the steps to take to sell a home that still has a mortgage.
Get a Payoff Quote
To determine exactly how much of the mortgage you still owe, you’ll need a payoff quote from your mortgage servicer. This is not the same thing as the balance shown on your last mortgage statement. The payoff amount will include any interest still owed until the day your loan is paid off, as well as any fees you may owe.
The payoff quote will have an expiration date. If the outstanding mortgage balance is paid off before that date, the amount on the payoff quote is valid. If it is paid after, sellers will need to obtain a new payoff quote.
Determine Your Home Equity
Equity is the difference between what your property is worth and what you owe on your mortgage (your payoff quote is most accurate). If your home is worth $400,000 and your payoff amount on the existing mortgage is $250,000, your equity is $150,000.
When you sell your home, you gain access to this equity. Your mortgage, any second mortgage like a home equity loan, and closing costs are settled, and then you are wired the excess amount to use how you like. Many homeowners opt to use part or all of the money as a down payment on their next home.
Secure a Real Estate Agent
A real estate agent can walk you through the process of selling a home with a mortgage and clear up questions on other mortgage basics. Your agent will be particularly valuable if you need to buy a new home before selling your current home.
Set a Price
With your agent, you will look at factors that affect property value, such as comparable sales in your area, to help you set a price. There are different price strategies you can review with your agent to bring in more buyers to bid on your home.
Accept a Bid and Open Escrow
After an open house and showings, you may have an offer (or a handful). Consider what you value in accepting an offer. Do you want a fast close? The highest price? A buyer who is flexible with your moving date? A buyer with mortgage preapproval?
You may also choose to continue negotiating with prospective buyers. Once you’ve selected a buyer and have signed the contract, it’s time to go into escrow.
Review Your Settlement Statement
You’ll be in escrow until the day your transaction closes. An escrow or title agent is the intermediary between you and the buyer until the deal is done. While the loan is being processed, title reports are prepared, inspections are held, and other details to close the deal are being worked out.
Three days before, you’ll see a closing disclosure (if you’re buying a house at the same time) and a settlement statement. The settlement statement outlines fees and charges of the real estate transaction and pinpoints how much money you’ll net by selling your home. 💡 Quick Tip: Generally, the lower your debt-to-income ratio, the better loan terms you’ll be offered. One way to improve your ratio is to increase your income (hello, side hustle!). Another way is to consolidate your debt and lower your monthly debt payments.
Selling a House With a Negative Equity
Negative equity means that the value of an asset (such as a home) is less than the balance due on the loan against it. Say you purchased a property for $400,000 with a $380,000 loan, but then the real estate market took a nosedive. Your property is now worth $350,000, less than the amount of the mortgage.
If you have negative equity in the home and need to sell it, it is possible to sell if you come up with the difference yourself.
In this scenario (an alternative to a short sale), you pay the difference between the amount left on your mortgage note and the purchase offer at closing. So in the example above, if you sold the house for $350,000, at the closing, you would need to pay the loan holder an additional $30,000 to clear the debt.
The Takeaway
Selling a house with a mortgage is common. The buyer pays the sales price, and that money is used to pay off your remaining mortgage, your closing costs, and any second mortgage. The rest is your profit.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% – 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It’s online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
FAQ
Who is responsible for the mortgage on the house during the sale?
The homeowner is responsible for continuing to pay the mortgage until paperwork is signed on closing day.
What happens if you sell a house with a HELOC?
When you sell a home that has a home equity line of credit with a balance, a home equity loan, or any other kind of lien against the house, that will need to be paid off before the remaining equity is paid out to you.
What happens to escrow money when you sell your house?
Your mortgage escrow account will be closed, and any money left will be refunded to you.
Can I make a profit on a house I still owe on?
Yes. You can make a profit if the amount you sell your house for is greater than the amount you owe on it, less closing and settlement costs.
Can I have two mortgages at once?
Yes, you can have two mortgages at once if the lender approves it.
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*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
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