Is Now a Good Time to Buy a House? Your Answer for January 2023

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More than 60% of U.S. renters would buy a home if their lease ended this month. But is January 2023 a good time to buy a home?

We think it is. 

The most recent When Should I Buy A Home video says: 

  1. First-time home buyers are getting mortgage rates in the 5-percent range
  2. Home values defied predictions of a crash
  3. Home sellers are now acquiescing to home buyer demands

This article reviews the January 2023 housing market for first-time buyers and supports why now is a good time to pre-approve your mortgage and buy your first home. 

Mortgage Rates Are Already Dropping 

Mortgage rates peaked last season and continue lower. 

According to Mortgage News Daily, after the release of December’s job report, 30-year fixed-rate mortgage rates fell 30 basis points (0.30%), marking the largest one-day drop for rates in more than a month.

The move pushed interest rates to levels not seen since September because Wall Street now believes that the Federal Reserve may have engineered its soft landing for the U.S. economy while ending inflation. 

As inflation pressures retreat, so do mortgage rates.

Meanwhile, first-time buyers get extra help. 

New affordable homeownership policies out of Fannie Mae and Freddie Mac mandate nationwide mortgage rate discounts for low- and moderate-income first-time buyers. Eligible buyers get discounts up to 1.75 percentage points off their interest rate.

Every one-point drop in mortgage rates adds 11 percent to your purchasing range.

Get pre-approved to see if you qualify.

Home Values Aren’t Likely To Fall In Most U.S. Cities

Another reason January 2023 is a good time to buy a home is home values did not crash this year, defying prediction.

According to real estate data company Altos Research, single-family homes for purchases, which includes detached houses, townhomes, and condos, dropped 4 percent through the first week of the New Year, lowering the national count of homes for sale to 471,000.

Home inventory is its lowest in six months. 

Meanwhile, demand from home buyers is strong and climbing. data shows a 16.1 percent jump in mortgage applications since early December, and search traffic from first-time home buyer queries such as “first-time home buyer grants” and “what credit score do you need to buy a house” nearly doubled in the same period.

Shrinking supply and rising demand from new buyers traditionally push home values higher. 

Sellers Are “Throwing Money” At Buyers Right Now

A third reason why January 2023 is a good time to buy a home, to borrow a phrase from Axios, is that “sellers are throwing money at buyers right now.”

This month’s buyers can negotiate good deals.

A sample of real estate contracts shows 42% of sellers gave concessions to buyers, including money for home repairs, closing costs, and mortgage rate buydowns. One-third of sellers lowered their list price to make their homes more affordable.

Sellers lost their leverage. 

Buyers now make demands, and sellers meet those demands. Between now and mid-February, buyers will retain their advantage to buy terrific homes at lower, more affordable prices.

Mortgage Rate Discounts For First-Time Buyers

Eligible first-time buyers now get an automatic mortgage rate discount on conventional mortgage loans.

The program is called the FHFA First-Time Home Buyer Mortgage Rate Discount. It’s available to low- and moderate-income first-time buyers who purchase a primary home and finance it using a conventional fixed-rate or adjustable-rate mortgage.

The discount program applies to single-family homes — including condos and townhomes — and 2-4 unit properties. Under the affordable homeownership plan, home buyers get mortgage rate discounts of up to 1.75 percentage points off standard market interest rates.

The FHFA First-Time Home Buyer Mortgage Rate Discount lowers mortgage rates instantly and automatically. It changes the math of “Should I rent or buy a home?”

The discount program is temporary, which is another reason why January 2023 is a good time to buy a home. Once the program’s gone, mortgage rates go up.

Buying A Home With A Small Down Payment

For many first-time home buyers, when it’s time to buy a home, it’s time to buy a home.

It’s doesn’t matter whether current interest rates are too high, home supplies are too low, or whether there’s enough money saved up in the bank.

Homeownership can’t always wait.

Thankfully, first-time buyers can achieve their American Dream of homeownership without having 20 percent saved for a down payment. 

Buyers can use any of the several, government-backed low down payment mortgages, and down payment assistance programs are available to eligible buyers. 

Plus, it’s getting easier to get a mortgage approved. 

Lenders have lowered minimum credit score requirements for certain low- and zero-down loans, and Congress also is stepping in to assist. 

Nine homeownership and affordable housing bills are working through Congress to give first-time buyers programs tax credits, cash grants, and other purchase incentives.

Buying A Home Into The 2023 Housing Market

January 2023 is a favorable time to buy your first home. Mortgage rates are down, home prices are settled, and buyers have leverage over sellers.

Our advice for today’s home buyers:

First, get your mortgage pre-approval done. Mortgage pre-approvals use today’s mortgage rates to tell buyers how much home they can afford and sets realistic boundaries for a home search.

Every successful home purchase starts with a pre-approval. It’s never too early to get one.

Second, begin to improve your credit score. Supplement your monthly bill-paying with a credit-building service such as StellarFi that can work in as few as 30 days.

Third, research down payment assistance programs in your area via the HUD website. Some programs may have been discontinued or defunded in the new year, so call the local provider to verify availability.

Author: Dan Green

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