Everyone talks about it being a seller’s market right now, but it’s not all doom and gloom for buyers. Indeed, one blogger suggests that it’s quite the opposite – that now is a great time to be a homebuyer, though the reasons do nothing to address problems with affordability or tight inventories.
Ben Carlson, a portfolio manager at Ritholtz Wealth Management, tries to put things into perspective in his article on MarketWatch, saying that the way the real estate market has evolved in recent years puts new buyers at an advantage, even with the above mentioned problems.
1. The entire process can be done online
First and foremost, Carlson notes things are much easier for today’s buyer because the entire process can be completed online, even applying for and accepting a mortgage.
“You can typically see 20-30 pictures of every house that’s on the market on the internet,” Carlson writes. “You can make first-level determinations from your own living room about the types of homes you would like to look at without having to go to dozens of places in person. You can pull up tax records, school district maps and neighborhood reviews on every house on the market. There’s a huge timesaving aspect of being able to cross off the ones you don’t want to physically visit.”
His claims are backed up by evidence from Zillow Group, which noted in its most recent earnings report that it’s seeing more traffic than ever before so far this year.
2. Houses are bigger and better than before
Carlson argues that modern homes possess totally different characteristics than those from the past. Indeed, we only have to look at a recent report on today’s homes from the U.S. Census Bureau, which confirms Carlson’s observations.
The report notes that a massive 49 percent of new homes in 1973 had no air conditioning, compared to just four percent of new homes now. In addition, 40 percent of new homes in 1973 had 1.5 bathrooms or less, compared to just four percent of homes that have fewer than 1.5 bathrooms now. Lastly, new homes are generally bigger. In 1973, new homes had a median average of just 1,525 square feet of space, compared to 2,467 square feet of space today.
3. Historically low mortgage rates
Carlson’s last point explains the advantage of the “historically low interest rates” that are often bandied about by real estate market watchers. He notes that mortgage rates presently sit at the lowest levels seen all year, citing Freddie Mac’s most recent figures which show the 30-year fixed rate mortgage averaged just 3.60 percent on the week ending June 9.
Here’s how Carlson figures the math and the advantage that brings:
“So at today’s median home value — $296,400 — and at current mortgage rates — 3.63% — the monthly payment would come out to $1,349 a month (before taxes, PMI, down payment, etc.),” Carlson wrote. “That same mortgage at 1981 interest-rate levels would have cost you more than three times as much or $4,136 a month. Your money goes much further at today’s rates than any time in the past 40-plus years. People talk about a student-loan crisis these days, but I’m guessing the savings we now receive from lower interest rates on home loans has to dwarf those in comparison.”