If you’ve been paying attention to the real estate market, you know it’s been quite the rollercoaster in 2020, especially for first time buyers. While lower than normal interest rates have been a great advantage, there have been a few speed bumps along the way.
Supply and demand has caused an increase in home prices -especially here in Connecticut. With limited houses on the market to choose from, it’s certainly become a seller’s market. The average home price increased by about 12.9 % according to Realtor.com’s Weekly Housing Report. For the average first time home buyer, this means not only are they paying more for a home, but it’s an increase in the down payment. A home that would have sold in early 2020 for $150,000 with a 20% down payment of $30,000 is now selling for over $169,000 and a 20% down payment of almost $39,000.
Low inventory has also made it much harder to find a home that fits the buyers needs. There may be some concessions that need to be made or buyers may need to broaden their search to neighboring towns. Buyers may also run into situations where there are multiple offers on a home. Not only can this be stressful, but it can lead to a buyer paying more for a home than they initially intended.
Credit availability may play a factor in whether you can secure a mortgage. Due to a spike in mortgage delinquency rates, the conventional mortgage market decreased by 6.1% in September. This means lenders aren’t giving out as much money in mortgage loans and may require you to have a higher credit score to qualify than you might have needed a few months ago.
The question remains, will 2021 be a better year for buyers, specifically first-time buyers? Of course, no one has a crystal ball to predict 100%, but pending any major changes to the economy, 2021 is shaping up to continue the 2020 trends of higher than average sale prices and low interest rates. This could give first time buyers extra time to save up for additional down payment funds needed to purchase a home.
Even though interest rates are predicted to stay low, home inventory is also projected to remain low. Limited inventory is a main reason for elevated home prices and there is no indication that an influx in new homes will hit the market. With lower interest rates, buyers may still be able to keep their monthly payments roughly the same despite paying a higher price – so don’t give up that home search just yet.
Have questions about the home buying process or how to qualify for a mortgage? Our team of experts is here to help you through every step of the way! Give us a call or stop into any of our conveniently located branches.
Vice President, Senior Mortgage Lender
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