FHA & VA rates in the low 6s

The government backed loan products are seeing rates nearly a full percentage point lower than Conventional loans in the current market. This bodes well for first time home buyers that have been priced out of local market when rates were at or above 7%. 

We should see PITI payments in the $3000 range on a median priced home here in Vancouver. FHA will allow up to a 50% debt to income with strong credit profiles. That means the local median household income can afford the median priced home for the first time since 2021. 

I have been harping on the fact that we just went through the most affordable housing market in US history. In fact rates were at or under 5% for more than a decade from about 2009 till 2021. This spoiled a lot of buyers into thinking that was the norm when in fact it was highly irregular. Now with rates settling down to about the 50 year average, we should see an opportunity for buyers once again to get into the market.

Incomes are not rising like they were a few years ago, but prices have also flattened out a bit as well. I have said all throughout this recent period that rates around 6% are healthy and we are now right there at least on the government backed loans like FHA and VA. 

Some people that bought a home a year or two ago may be in a position to refinance into a lower payment, but be careful and make sure you understand the costs involved in that process. Sometimes it is a good deal and sometimes it is not. A trusted professional loan officer with your best interests at heart is critical when considering a refi.

So buyers let's get out and start looking and homes and sellers, you may be able to get that next house after all.

Inventory Continues to Increase!

We have been quietly adding inventory over the last couple of years. As interest rates start to settle down a bit, more buyers are entering the market. This should lead us to a neutral market if the trend continues. At this point we remain in conditions that favor sellers, but buyers are able to be choosier than just a few years back.

The latest data from the RMLS show that here in Clark County, we had 1638 active listings and 584 closed sales last month bringing the inventory to 2.8 months which is a still very healthy. The median sales price last month was $550,000 with a high of $2.3 million and a low of $60,000. The average sale price was substantially higher at $623,078 suggesting that activity in the mid-level market may be on the rise.

Rates are starting to settle into the 6s which bodes well for buyers that have struggled to qualify with rates in the 7s. 

The prognosis for the 4th quarter looks promising as rates come down and inventory softens up pricing a bit. We should continue to see very modest appreciation through the end of the year.

Interest Rates are softening up a bit

We are seeing some relief in mortgage rates and likely will see some more over the next several months. Housing prices have remained flat and the median price has fallen off its record highs of a year or so ago. The lower median is more an indication of more activity in the lower end of the spectrum and less activity at the top, rather than actual falling prices. 

We are not seeing much in the way of the classic middle move up market where homeowners sell their entry level  2 bed or 3 bed house to move up to a larger 4 bedroom home. There are two primary reasons driving this lack of middle move up. First, interest rates are much higher now than they were when most of these potential sellers financed the current house. I have harped on the notion that homeowners are married to their 3%-4% mortgage for months now. Second, there is a current trend across the USA of smaller family sizes. The USA is no longer having families large enough for replacement population. We are relying on new immigration to keep growth moving forward. Smaller families means less of a need for a larger house, whether the rates are low or not.

When the bulk of the sales activity is near the bottom of the market, the median will come down, even if prices are rising. Locally prices remain steady, neither rising much nor falling much. If typical interest rates fall into the high 5s or very low 6s, we may see some of that middle move up market return and thus the median would perk up a bit as well. I do not expect to see the middle move up market return to the glory days of yesteryear unless Gen Z decides to buck the Millennial trend of smaller families and start having 2-3 kids each. With our economy in an upward inflationary cycle, the small family trend is likely to continue. 

One thing that could help move those larger 2500+ square foot 4 and 5 bedroom homes in the $600-800k range would be joint ownership by two small families or more multi-generational family living. In the mean time buyers will continue to have a difficult time finding homes in the entry level price ranges due to a lack of inventory, and sellers of larger homes will face pickier buyers and downward price pressure. 

Locally inventory levels are creeping up to about 3 months which remains firmly in favor of sellers, but the trend is slowly moving towards neutral conditions. I suspect we will remain in a low volume market with steady prices for at least the next 6 months.