Zillow recently published research detailing the changing housing market in the United States, as it swings toward becoming a buyers’ market. According to their research, Zillow found that many of the largest U.S. housing markets are becoming buyer friendly.
How Homebuyer-Friendly Metros Were Determined
Three criteria were used to determine whether a metropolitan housing market is buyer friendly:
- The number of listings with price cuts.
- Rental price increases projected for 2019.
- The relative affordability of homes compared to the past.
Housing Affordability and Interest Rates
The U.S. Federal Reserve Bank is gradually increasing interest rates. Over time, this leads to higher mortgage interest rates that are closer to historic norms.
Mortgage interest rates have been low since the market crash in 2008. Now that interest rates are slowly rising, homebuyers who are ready to purchase should consider doing so soon, before mortgage interest rates and monthly payments increase even more.
According to Zillow, “With interest rates on the rise, and mortgage affordability already closing in on its historic norm, prepared buyers may want to enter the market before housing payments become historically unaffordable.”
What Are the Best Places to Buy in Winter 2018-2019?
Based on their research, Zillow found these cities to be the best places to buy in the winter of 2018-2019:
- Orlando
- Boston
- Seattle
- Las Vegas
- Charlotte
- Columbus
- Portland
- Sacramento
- Minneapolis
- Dallas
- Kansas City
- Chicago
- San Diego
- Cincinnati
- Tampa
- Austin
- Atlanta
- Philadelphia
- Washington
- Miami
- Houston
- San Jose
- Baltimore
- Los Angeles
- Denver
- Phoenix
- Louis
- Detroit
- San Francisco
- Riverside, CA
- San Antonio
- Cleveland
- Pittsburgh
- Indianapolis
In the past, winter has not been a good season for homebuying, but this year it looks like a better market for buying than in years before. Furthermore, with mortgage interest rates remaining low, buyers may be able to more easily find affordable homes to buy now than in the future.
Affordability in the cities listed above is at a critical point. As interest rates edge up, some buyers are unable to afford a home, although they had planned to enter the market. This has left an unusual large number of listings on the market, giving buyers more options at different levels of affordability in various metros.
According to Zillow Senior Economist, Aaron Terrazas, “The housing market always lets up a little in the fall, when kids are back in school and the home shopping season wraps up for the holidays,” said Zillow Senior Economist Aaron Terrazas. “But this fall and winter are shaping up to be more favorable for those buyers who have struggled to get into the housing market for several years amid red-hot competition. Mortgage rates are rising, but will climb much further in 2019 and early 2020. As purchase affordability deteriorates, expect rents to pick back up as some would-be buyers put their plans on ice. Renters who were thinking of buying and decided to hold off may want to take another look this winter, as a steady clip of mortgage rate increases chips away at affordability and more homes become available on the market.”
Comparing Price Cuts and Affordability
Housing markets in the U.S. are experiencing changes. Homebuyers can now find more listings with price cuts in the 35 largest metros, as affordability fluctuates and rental prices appear to be increasing.
Orlando, for example, has experienced a 6.8% increase in home listings with price cuts, and has an overall affordability of 20.2% with a median home value of $231,000. Rent is projected to increase by 1.4% in 2019.
Tampa also is appealing, with a 5.9% increase in price cuts and 18.7% affordability. Rent is expected to decrease in Tampa by 0.3%.
In Pennsylvania, Philadelphia has an affordability rating of 16.1%, there was a 1.3% reduction in home listings with price cuts and the projected rent increase is 1.6% for 2019. Pittsburgh, on the other hand, has a solid 11.7% affordability with a slight increase of 0.7% of listings with price cuts, with rent projected to increase by 0.5% in 2019.
In Washington, DC, affordability is at 19.4% with a 0.5% increase in listings with price cuts, and a 0.7% projected increase in rental prices. Current median home values are at $401,000.
Take Away
With a combination of rising interest rates and steadily deteriorating affordability, more homebuyers are dropping out of the market in favor of renting. This puts remaining homebuyers in a better position to negotiate and make a purchase in the winter of 2018-2019. With interest rate increases scheduled for 2019 and early 2020, now may be the best time to enter the housing market.
So, if you are thinking about purchasing a home in the relatively near future, now is the time to prepare by becoming pre-approved for a mortgage.
Related: Preparing to Buy Your New Home – Is it too early to get pre-approved for a mortgage?
Marimark Mortgage
Marimark Mortgage is based in Tampa, Florida and serves the mortgage needs of homebuyers, homeowners, and investors in Florida, Virginia, and Pennsylvania.
We specialize in conventional home mortgages, FHA, VA, and USDA mortgage options, refinance loans, and reverse mortgages. We’ve worked extensively with cash-out refinancing and help clients to lower their monthly mortgage payments.
To get started with a mortgage to buy your next home, please fill out our Quick Mortgage Application, or contact us direct.
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