California homebuyers close their wallets in today’s market

homebuyers continue to press the pause button on california real estate market.

Although home prices are now in full reversal (encouraging news for homebuyers previously shut out by high home prices), this downward slide comes with a major catch.

The California Buyer’s Purchasing Power Index (BPPI) in the third quarter (Q3) of 2022 plunged to -31.3. This number reflects how a prospective home buyer With the same income, you will buy 31.3% less money from the purchase assistance mortgage than you would a year earlier when interest rates were lower.

In contrast, the BPPI was positive during 2019-2021 due to lower Mortgage Interest Rates: A far cry from the 7% pushing 30-year FRM rate faced by prospective homebuyers in today’s housing market.

Also, home buyers are currently experiencing a massive 40% increase in new mortgage payments from the start of 2022, resulting in many being distressed housing — spend more than 30% of your income on mortgage payments. This has brought many homebuyers back into the rental market and left homebuyer sentiment in the ditch

Therefore, even with falling home prices, foreclosed home buyers are unable to muster the necessary assistance to purchase a property.

This is reflected in the portion of homes sold above the final list price. In October 2022, the rate of homes sold up the price fell to only 33%, compared to 59% the previous year.

Sellers struggle to attract buyers and price cuts they are the natural response to a seller who sets the list price too high. In October 2022, the share of sales price cuts rose to 36%, double the 18% a year earlier, according to Redfin.

While the price cuts present a promising incentive to buy, homebuyers need to hit the pause button once again. Home prices continue to fall. Reasonable homebuyers are best served by waiting until it is clear that prices have bottomed out before approaching the housing market.

Follow the real estate path

The California housing market will tighten further.

The best option for potential homebuyers: expect ongoing decline.

At the rate that home prices are plummeting, by the time any homebuyer buying a low down payment mortgage hits a purchase agreement and finishes Depositthe value of your property will be under water.

underwater homeowners are more likely to default on their mortgage payments, sending them straight to a foreclosure sale — unless they can negotiate a short sale with the lender.

With the unreported recession pushing the housing market to the brink of a buyers marketMany opportunities await the patient homebuyer in the years to come. the first tuesday forecast sees home prices drop over the next two years, bottoming out in 2025.

By putting off buying a home until then, potential buyers will be able to find a home at very low prices.

For potential sellers, a tough choice awaits. Plummeting home values ​​mean sellers won’t receive a higher or equivalent value for their homes until the housing market is in its next uptrend. Sellers who anticipate selling in the next two years make their best listing today before prices drop too low. Otherwise, they will wait a long time for the next price spike.

Real estate professionals can survive the recession by focusing on finding the few homebuyers willing to take the plunge during the real estate recession.

Stay connected with real estate practices by subscribing to first tuesday weekly newsletter, Quilix.

Related article:

Economic recession or not, the housing market recession is already here

Source

Leave a Comment