Buying a home? You may have leverage

Pool of buyers thinning, mortgage rates rising Keith and Kylie Beukema were bracing for a yearlong slog as they started hunting for a larger home in the Denver area, one of the hottest housing markets in the country the past few years. Instead, it recently took them just two weeks to snag their four-bedroom dream house with mountain views in Thornton, paying $490,000 – $10,000 below asking price – after visiting just three other homes. “I was nervous (the seller) would laugh us off,” said Kylie, a 29-year-old physician. “We figured we’d get into bidding wars” and almost certainly have to pay above list price. Denver epitomizes the slowdown taking hold this year in the nation’s housing market as mortgage rates climb, home prices rise and the new tax law limits the benefits of ownership. Those hindrances are adding to a longer-standing obstacle to sales – low home supplies – and making the housing market across most of the country more favorable for buyers – if they can afford the added costs. “Definitely, there is a shift in the market,” said Lawrence Yun, chief economist of the National Association of Realtors. “Buyer activity appears to be softening ... Buyers have more chances.” While housing is still largely a seller’s market, it’s becoming less so, and the playing field should be roughly balanced between buyers and sellers by the middle of next year, said Ralph McLaughlin, chief economist of research firm Veritas Urbis Economics.

Home sales slip

Nationally, existing home sales were down 2.1 percent through the first nine months of the year compared with the same period in 2017. The prior three years, annual gains for home sales totaled 6.3 percent, 3.8 percent and 2.7 percent, according to NAR. The Realtors group on Friday reported a 3.4 percent sales drop in September from the previous month to the lowest level since November 2015, though Hurricane Florence in the Carolinas contributed to the weak showing. Prices for homes are still rising in general, although more slowly. In September the median price was up 4.2 percent from a year earlier to $258,100, but that marked a pullback from gains of 5.1 percent and 5.7 percent in 2016 and 2017, respectively. Next year, NAR’s Yun expects flat sales and price increases of just 2 to 3 percent. Of course, housing’s health varies by location. Generally, expensive Western markets such as Denver, San Francisco and Seattle had been posting double-digit yearly price gains that have slowed. More affordable areas such as Indianapolis and Grand Rapids, Michigan, are still seeing price increases accelerate. And reasonably priced Southern markets such as Atlanta remain hot, said Daryl Fairweather, chief economist of real estate brokerage Redfin.

Rates rise, first-time buyers dip

Nationally, rising mortgage rates are playing a bigger role and compounding the effect of U.S. home prices that are up more than 50 percent since their 2012 bottom. Fixed 30-year mortgage rates averaged 4.85 percent for the week ending Oct. 18, according to Freddie Mac, up from 3.88 percent a year ago. That bumps up the monthly payment on a typical $210,000 mortgage by about $125. The higher rates are “making many people scared,” from first-time homebuyers to trade-up buyers seeking more expensive homes, Yun said.