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Scottsdale AZ Luxury Home Market – August 2022

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– Scottsdale Luxury Home Market Performance for August 2022 –

Sales results were mixed in August. In some price points, sales rebounded after a quiet July and in others, sales were level or down.

This report covers the luxury home market in Scottsdale. All of these homes were on the market for one million dollars or more. To show additional detail, we split the data into four price bands.

We track the following sales metrics on a monthly basis:
Active – The number of active listings at the end of the month.
UCB (Under Contract Accepting Backup Offers) – The number of homes under contract, but still accepting backup offers at the end of the month.
Pending – The number of pending sales at the end of the month.
Sold – How many homes sold that month.

– August 2022 –

Scottsdale Homes Priced Between $1,000,000 – $1,499,999

Scottsdale Homes for Sale between $1 and $1.5 million August 2022

– Active Scottsdale Homes on the Market: The number of active listings fell slightly by the end of August, but we are more than double the 12 month average at 234.
– UCB Scottsdale Home Sales: The number of UCB contracts rebounded and closed out at 41.
– Pending Scottsdale Home Sales: Pending sales were also up in August.
– Scottsdale Homes Sold: Sales fell to their lowest level in the past year. This is down 34% compared to July’s performance.
– Sales Price to Listed Price: 94.9%- On average, buyers saw a discount of 5.1% off of list price.

Scottsdale Homes Priced Between $1,500,000 – $1,999,999

Scottsdale Homes for Sale between $1.5 and $2 million August 2022

– Active Scottsdale Homes on the Market: The number of homes for sale in this price point was up slightly at the end of the month.
– UCB Scottsdale Home Sales: UCBs were up slightly as well.
– Pending Scottsdale Home Sales: The number of pending contracts fell in August, but still turned in a decent performance.
– Scottsdale Homes Sold: The number of home sales jumped 28.9% between the end of July and the end of August.
– Sales Price to Listed Price: 96.6% – On average, buyers saw a discount of 3.4% off of list price.

Scottsdale Homes Priced Between $2,000,000 – $2,999,999

Scottsdale Homes for Sale between $2 and $3 million August 2022

– Active Scottsdale Homes on the Market: The number of homes for sale was down slightly in August, but still was way above the 12 month average of 70 homes.
– UCB Scottsdale Home Sales: UCBs fell to the lowest level we have seen in the past year.
– Pending Scottsdale Home Sales: The number of spending also fell in August. This figure and the UCB figure indicate that we will see fewer sales in September in this price point.
– Scottsdale Homes Sold: Home sales were down slightly compared to July.
– Sales Price to Listed Price: 95.3% – On average, buyers saw a discount of 4.7% off of list price.

Scottsdale Homes Priced $3,000,000+

Scottsdale Homes for Sale over $3 million August 2022

– Active Scottsdale Homes on the Market: Inventory in this price point was down slightly to close out the month at 154.
– UCB Scottsdale Home Sales: The number of UCB contracts was only half of what is was at the end of July. This is the lowest we have seen this figure in the past year.
– Pending Scottsdale Home Sales: Pending sales were down slightly, but still turned in a solid performance.
– Scottsdale Homes Sold: After a quiet July, sales were up 37.5% in August.
– Sales Price to Listed Price: 91.7% – On average, buyers saw a discount of 9.3% off of list price.

If you would like additional detail on home sales activity, please visit our Scottsdale Luxury Home Market Reports page and click on the downloadable “Scottsdale Market Trends” report.

Search Scottsdale Luxury Homes for Sale

Disclaimer: Information deemed reliable but not guaranteed. Data and information were pulled from the Arizona Regional MLS (ARMLS) as of 9/1/2022 and can change at any time. The analysis looks at single-family luxury resale homes in Scottsdale AZ over the last 12 months. There may be new home inventory in these figures if the developer is using the MLS to market its homes. This blog represents the opinion of the author. No warranties expressed or implied.
Copyright ©2022 Heather Tawes Nelson | Joyce Tawes

Will My House Still Sell in Today’s Market?

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If recent headlines about the housing market cooling and buyer demand moderating have you worried that you’ve missed your chance to sell, here’s what you need to know. Buyer demand hasn’t disappeared, it’s just eased from the peak intensity we saw over the past two years.

Buyer Demand Then and Now

During the pandemic, mortgage rates hit record lows, and that spurred a significant rise in buyer demand. This year, as rates increased due to factors like rising inflation and an increase in home prices, buyer demand pulled back or softened as a result. The latest data from ShowingTime confirms this trend (see graph below):

Will My House Still Sell in Today’s Market? | MyKCM

The orange bars in the graph above represent the last few months of data and the clear cooldown in the volume of home showings the market has seen since mortgage rates started to rise. But context is important. To get the full picture of where today’s demand stands, let’s look at the July data for the past six years (see graph below):

Will My House Still Sell in Today’s Market? | MyKCM

This second visual makes it clear that, while moderating compared to the frenzy in 2020 and 2021, showing activity is still beating pre-pandemic levels – and those pre-pandemic years were great years for the housing market. That goes to show there’s still demand if you sell your house today.

What That Means for You When You Sell

The key to selling in a changing market is understanding where the housing market is now. It’s not the same market we had last year or even earlier this year, but that doesn’t mean the opportunity to sell has passed.

While things have cooled a bit, it’s still a sellers’ market or in some areas of the Valley, a balanced market. If you work with a trusted local expert to price your house at the current market value, the demand is still there, and it should sell reasonably quickly. According to a recent survey from realtor.com, 92% of homeowners who sold in August reported being satisfied with the outcome of their sale.

Bottom Line

Buyer demand hasn’t disappeared, it’s just moderated this year. If you’re ready to sell your house today, let’s connect so you can have expert insights on how the market has shifted and how to plan accordingly for your sale.

Phoenix and Scottsdale AZ Luxury Condo Sales – August 2022

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Luxury Condo Sales in Scottsdale and Phoenix – August 2022

Unlike what we are seeing in other types of housing, the luxury condo market continues to plug along.

In this report, we take a look at luxury condo sales in Scottsdale and Phoenix. All of these units had been on the market at $1 million or more. 

ACTIVE LISTINGS AT THE END OF AUGUST

The number of luxury condos for sale increased by one when compared to the end of July. There were 52 units for sale and of these, 46 of them were located in Scottsdale.

The most expensive condo on the market was a carry over from last month. It is located in Ascent at the Phoenician, which is a new development that is under construction. This unit was listed for $4,450,000 and has three bedrooms, three and one-half bathrooms and 3,985 square feet. 

The least expensive condo for sale was at Optima Camelview. It has two bedrooms and bathrooms and 1,424 square feet. The listing price was $1,025,000. 

UCB* LUXURY CONDO SALES IN SCOTTSDALE AND PHOENIX

There were four UCB condos at the end of August, down slightly from the six UCBs at the end of July. All of these UCB contracts were located in Scottsdale. 

UCB Condos in Scottsdale

  • Optima Camelview – Two bedrooms and bathrooms, 1,955 square feet. Asking price was $1,150,000.
  • Portico Condominiums – This is a new development in North Scottsdale.
    • Three bedrooms, two and one-half bathrooms, 2,090 square feet. Asking price was $1,188,000.
    • Three bedrooms and bathrooms, 2,396 square feet. Asking price was $1,652,400.
  • ICON in Silverleaf – Three bedrooms, four bathrooms, 3,157 square feet. Asking price was $2,750,000.

UCB Condos in Phoenix

  • There were no UCB contracts in Phoenix at the end of August

PENDING LUXURY CONDO SALES IN SCOTTSDALE AND PHOENIX

Pending sales fell to forty-one by the end of August. Some of this can be attributed to slower sales activity, but we are now also seeing a lot of condos that had been under construction for a while complete and close. 

Scottsdale Pending Luxury Condos

  • Portico Scottsdale – Three bedrooms, two and one-half bathrooms, 2,090 square feet. Asking price was $1,188,000.
  • The Reserve – This community is under construction.
    • Two bedrooms, two and one-half bathrooms, 2,639 square feet. Asking price was $1,004,500.
    • Two bedrooms, two and one-half bathrooms, 2,639 square feet. Asking price was $1,011,500.
    • Two bedrooms, two and one-half bathrooms, 2,639 square feet. Asking price was $1,012,450.
    • Three bedrooms and three bathrooms, 2,675 square feet. Asking price was $1,026,500.
    • Three bedrooms and three bathrooms, 2,675 square feet. Asking price was $1,063,000.
    • Two bedrooms, two and one-half bathrooms, 2,020 square feet. Asking price was $1,075,000.
    • Three bedrooms and three bathrooms, 2,675 square feet. Asking price was $1,159,000.
    • Two bedrooms, two and one-half bathrooms, 2,639 square feet. Asking price was $1,271,450.
    • Three bedrooms and three bathrooms, 2,675 square feet. Asking price was $1,279,900.
  • Ascent at the Phoenician – This is another fantastic development underway.
    • One bedroom, one and one-half bathrooms, 1,698 square feet. Asking price was $1,475,000.
    • Two bedrooms, two and one-half bathrooms, 1,847 square feet. Asking price was $1,600,000.
    • Two bedrooms, two and one-half bathrooms, 2,374 square feet. Asking price was $2,050,000.
    • Two bedrooms, two and one-half bathrooms, 2,679 square feet. Asking price was $2,285,000.
    • Two bedrooms, two and one-half bathrooms, 2,679 square feet. Asking price was $2,395,000.
    • Three bedrooms, three and one-half bathrooms, 3,867 square feet. Asking price was $3,975,000.
    • Three bedrooms, three and one-half bathrooms, 3,996 square feet. Asking price was $4,100,000.
    • Three bedrooms, three and one-half bathrooms, 3,996 square feet. Asking price was $4,750,000.
    • Three bedrooms, three and one-half bathrooms, 3,996 square feet. Asking price was $4,895,000.
    • Three bedrooms, three and one-half bathrooms, 3,945 square feet. Asking price was $4,950,000.
  • Seven at Desert Mountain – This community is also under construction.
    • Three bedrooms, three and one-half bathrooms, 2,414 square feet. Asking price was $1,536,004.
    • Three bedrooms, three and one-half bathrooms, 2,716 square feet. Asking price was $1,809,900.
  • ICON at Silverleaf – Currently under construction.
    • Two bedrooms, three bathrooms, 2,752 square feet. Asking price was $1,995,000.
    • Two bedrooms, three bathrooms, 2,752 square feet. Asking price was $2,150,000.
    • Two bedrooms, three bathrooms, 2,752 square feet. Asking price was $2,500,000.
    • Two bedrooms, three bathrooms, 2,752 square feet. Asking price was $2,625,000.
    • Three bedrooms, four bathrooms, 3,157 square feet. Asking price was $2,700,000.
    • Three bedrooms, four bathrooms, 3,157 square feet. Asking price was $2,800,000.
    • Two bedrooms, three bathrooms, 2,752 square feet. Asking price was $2,900,000.
    • Three bedrooms, four bathrooms, 3,157 square feet. Asking price was $2,900,000.
    • Three bedrooms and bathrooms, 3,157 square feet. Asking price was $2,995,000.
    • Three bedrooms, four bathrooms, 3,157 square feet. Asking price was $3,175,000.
    • Three bedrooms, four bathrooms, 3,157 square feet. Asking price was $3,200,000.
    • Three bedrooms, four bathrooms 3,157 square feet. Asking price was $3,350,000.
    • Three bedrooms, three and one-half bathrooms, 3,945 square feet. Asking price was $4,950,000.
    • Four bedrooms, four and one-half bathrooms, 6,288 square feet. Asking price was $6,900,000.
    • Four bedrooms, four and one-half bathrooms, 6,288 square feet. Asking price was $7,700,000.
    • Four bedrooms, four and one-half bathrooms, 6,288 square feet. Asking price was $7,718,000.
    • Four bedrooms, four and one-half bathrooms, 5,534 square feet. Asking price was $8,000,000
    • Four bedrooms, four and one-half bathrooms, 6,288 square feet. Asking price was $8,350,000. 

Phoenix Pending Luxury Condos

  • One Lexington – Two bedrooms, two and one-half bathrooms, 2,288 square feet. Asking price was $1,295,000.
  • Fairway Lodge at the Biltmore – Two bedrooms, two and one-half bathrooms, 2,329 square feet. Asking price was $1,375,000.

LUXURY CONDO SALES IN SCOTTSDALE AND PHOENIX

There were eleven sales in August, up two from July’s nine sales. As I mentioned above, we are now seeing some of the communities that had been under construction finish up and deliver the units to the new owners.

Scottsdale Luxury Condo Sales

  • Optima Camelview – Two bedrooms and bathrooms, 1,984 square feet. Asking price was $1,150,000 and it sold for $1,125,000.
  • Seven at Desert Mountain
    • Three bedrooms, three and one-half bathrooms, 2,414 square feet. Asking price was $1,950,000 and it sold for $1,850,000.
    • Three bedrooms, three and one-half bathrooms, 2,414 square feet. Asking price was $1,612,768 and it sold for $1,636,645.
    • Three bedrooms, three and one-half bathrooms, 2,716 square feet. Asking price was $1,835,850 and it sold for $1,955,608.
  • Optima Kierland – Two bedrooms, two and one-half bathrooms, 1,483 square feet. Asking price was $1,595,000. and it sold for $1,540,000.
  • The Reserve – Two bedrooms, two and one-half bathrooms, 2,639 square feet. Asking price was $1,404,109 and it sold for list price. 
  • Scottsdale Waterfront Residences – Two bedrooms, two and one-half bathrooms, 2,041 square feet. Asking price was $1,550,000 and it sold for $1,480,000.
  • Plaza Lofts at Kierland – Two bedrooms, two and one-half bathrooms, 1,942 square feet. Asking price was $1,399,000 and it sold for $1,300,000.
  •  

Phoenix Luxury Condo Sales

  • Fairway Lodge at the Biltmore
    • Two bedrooms, two and one-half bathrooms, 2,616 square feet. Asking price was $1,350,000.
    • Three bedrooms, two and one-half bathrooms, 2,329 square feet. Asking price was $1,415,000.
  • The Residences at 2211 Camelback – Two bedrooms, three bathrooms, 3,000 square feet. Asking price was $1,650,000 and it sold for $1,525,000.

Learn More About Phoenix and Scottsdale Luxury Condos

Search Phoenix and Scottsdale Luxury Condos for Sale

Disclaimer: Days on market figures are cumulative days on market. Information herein deemed reliable but not guaranteed. Data and information were pulled from the Arizona Regional MLS (ARMLS) as of 9/1/2022 and can change at any time. The analysis looks at resale luxury condos in Scottsdale and Phoenix over the past 12 months. Information deemed reliable, but not guaranteed.  There may be new condo inventory in these figures if the developer is using the MLS to market its homes. This post represents the opinion of the author. No warranties express or implied.
Copyright ©2022 Heather Tawes Nelson | Joyce Tawes

Buyers Are Regaining Some of Their Negotiation Power in Today’s Housing Market

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Buyers Are Regaining Some of Their Negotiation Power in Today’s Housing Market | MyKCM

If you’re thinking about buying a home today, there’s welcome news. Even though it’s still a sellers’ market, it’s a more moderate sellers’ market than last year. In fact, in some areas of the Valley, we have moved to a balanced market. Areas like Scottsdale and Paradise Valley still favor sellers somewhat though.

And the days of feeling like you may need to waive contingencies or pay drastically over asking price to get your offer considered may be coming to a close.

Today, you should have less competition and more negotiating power as a buyer. That’s because the intensity of buyer demand and bidding wars has been easing over the past several months. So, if bidding wars were the biggest factor that had you sitting on the sidelines, here are two trends that may be just what you need to re-enter the market.

1. The Return of Contingencies

Over the last two years, more buyers were willing to skip important steps in the home buying process, like the appraisal or inspection, to try to win a bidding war. But now, fewer people are waiving the inspection and appraisal.

The latest data from the National Association of Realtors (NAR) shows the percentage of buyers waiving their home inspection and appraisal is declining. And a recent survey from realtor.com confirms more sellers are accepting offers that include these conditions today. 

According to their August study:

  • 95% of sellers reported buyers requested a home inspection
  • 67% of sellers negotiated with buyers on repairs as a result of the inspection findings

This goes to show buyers are more able to include these conditions in their offers today and negotiate as needed based on the outcome of the inspection.

2. Sellers Are More Willing To Help with Closing Costs

Generally, closing costs range between 2% and 5% of the purchase price for the home. Before the pandemic, it was a common negotiation tactic for sellers to cover some of the buyer’s closing costs to sweeten the deal. This didn’t happen as much during the peak buyer frenzy over the past two years.

Today, as the market shifts and demand slows, data from realtor.com suggests this is making a comeback. A recent article shows 32% of sellers paid some or all of their buyer’s closing costs. This may be a negotiation tool you’ll see as you go to purchase a home. Just keep in mind, limits on closing cost credits are set by your lender and can vary by state and loan type. Work closely with your loan advisor to understand how much a seller can contribute to closing costs in your area without jeopardizing your financing.

Bottom Line

Regardless of the extremely competitive housing market of the past several years, today’s data suggests negotiations are starting to come back on the table. This is good news if you’re planning to enter the housing market. To find out how the market is shifting in our area, let’s connect.

Quick Video Update of the Scottsdale Real Estate Market – August 2022

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– August 2022 Scottsdale Housing Market Video –

Here is a one-minute video overview of the Scottsdale, Arizona real estate market that covers the month of August.

August 2022 – Video


Scottsdale Active Listings

Scottsdale homes for sale August 2022

Compared to earlier in the year, Scottsdale now has plenty of inventory. We are back to over 1,100 listings, which is great news for buyers.

Inventory was up 64% between August 2022 and August 2021. However, there was a decline of 9% between the end of July and the end of August 2022.

Median List Price for Scottsdale Homes

Scottsdale homes median list price August 2022

The median list price represents the price that is the exact midpoint price of all homes that are on the market. One half of the homes are priced higher and the other half are priced lower.

In August, the median list price was $1.2 million. Interestingly enough, it is the same as August 2021’s median list price. It moved slightly about July 2022’s $1.15 median list price.

Days on Market

Scottsdale homes days on market August 2022

This next section looks at the rate at which homes are selling. Days on Market (or DOM) measures the average number of days it took for homes to sell.

In August, we came in at 53 days, which is a 47% increase over last August’s 36 days.

Median Sales Price for Scottsdale Homes

Scottsdale homes median sales price August 2022

Here we are looking at August’s median sales price for homes.

At the end of the month, the median sales price in Scottsdale was $960K. This is down from the previous month’s $1.06M, but almost $100K above August 2021’s $865K.

Number of Homes Sold

In this last section, we will look at home sales.

Scottsdale Home Sales August 2022 versus 2021

This first image compares home sales on a year-over-year basis. Sales were down 33% compared to last year.

What is interesting to note is that even though there was a lot more inventory in August 2022, sales fell due to decreased buyer demand.

Scottsdale home sales July versus August 2022

This next image looks at sales on a month-over-month basis. Sales were actually up 18% compared to July.

We hope that you found this video and commentary helpful as you gather more information to make smart informed real estate decisions.

For more Scottsdale real estate information or if you have any questions about the local area, feel free to contact Joyce at (480) 209-7843 or Joyce@LiveBetterinScottsdale.com.

Click to watch other videos on our Live Better in Scottsdale YouTube Channel.

Interested in other stats for our market? Visit our Real Estate Market Update page.

Disclaimer: Data deemed to be accurate, but is not guaranteed.

Scottsdale AZ Single Family Home Sales – August 2022

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-August 2022 Scottsdale Homes for Sale and Home Sales –

Although inventory has jumped over the past several months, it was down at the end of the month. Sales were up after a slow July.

SCOTTSDALE HOME SALES ACTIVITY – AUGUST 2022

Each month, we track the following sales metrics:

– Single-family homes for sale – Orange Line – The number of homes on the market at the end of the month.
– Under contract, but accepting backup offers (UCB) – Gray Line – The number of UCB contracts at the end of the month.*
– Pending home sales – Yellow Line – The number of pendings there were at the end of the month.*
– Home Sales – Blue Line – The number of home sales for that month.

AUGUST 2022 RESULTS

Scottsdale home sales August 2022
  • Scottsdale Homes for Sale: The number of homes for sale fell 3.5% between the end of July and the end of August. However, there is still plenty of inventory compared to where we were earlier this year.
  • UCB (Under contract, accepting backup offers): The number of UCBs was up very slightly in August, closing out at 151.
  • Pending Homes Sales in Scottsdale: Pendings fell slightly in August, coming in at the lowest level we have seen in the past year.
  • Scottsdale Home Sales: The number of homes that sold rebounded a bit in August, which is positive news.

This next section contains two more metrics we track monthly.

Scottsdale real estate market August 2022

Percent Change Month Over Month – This metric compares the monthly performance to the previous month and helps you see trends over time. For example, in August home sales were up 15.8% when compared to July’s performance.

Sales Price to List Price – This is a quick way to gauge pricing trends. This metric compares what homes sold for in relation to what they were listed for. In August, it was 94.8%, the lowest it has been in the past year. Looking at it another way, buyers on average saw a 5.2% discount off of asking prices. Compare that to February through May when buyers were paying a premium over list on average.

*Figures for active homes for sale, UCB sales and pending sales are based on the numbers at the end of the month.

Curious about your buying power? Click on the link to learn more.

Search Scottsdale AZ Homes for Sale

Here is a sampling of some of the homes on the market, or click the link above to see all of the homes for sale.

Disclaimer: Data and information were pulled from the Arizona Regional MLS (ARMLS) as of 9/1/2022. Information deemed reliable, but not guaranteed. There may be new home inventory in these figures if the developer is using the MLS to market its homes. This post represents the opinion of the author. No warranties express or implied.
Copyright © 2022 Heather Tawes Nelson | Joyce Tawes

8 Strategies to Secure a Lower Mortgage Rate

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Mortgage rates have been on a roller coaster ride this year, rising and falling amid inflationary pressures and economic uncertainty. And even the experts are divided when it comes to predicting where rates are headed next.1

This climate has been unsettling for some homebuyers and sellers. However, with proper planning, you can work toward qualifying for the best mortgage rates available today – and open up the possibility of refinancing at a lower rate in the future.

How does a lower mortgage rate save you money? According to Trading Economics, the average new mortgage size in the United States is currently around $410,000.2 Let’s compare a 5.0% versus a 6.0% fixed-interest rate on that amount over a 30-year term.

Mortgage Rate
(30-year fixed)		Monthly Payment on $410,000 Loan
(excludes taxes, insurance, etc.)		Difference in Monthly PaymentTotal Interest Over 30 YearsDifference in Interest
5.0%$2,200.97 $382,348.72 
6.0%$2,458.16+ $257.19$474,936.58+ $92,587.86

With a 5% rate, your monthly payments would be about $2,201. At 6%, those payments would jump to $2,458, or around $257 more. That adds up to a difference of almost $92,600 over the lifetime of the loan. In other words, shaving off just one percentage point on your mortgage could put nearly $100K in your pocket over time.

So, how can you improve your chances of securing a low mortgage rate? Try these eight strategies:

1. Raise your credit score.

Borrowers with higher credit scores are viewed as “less risky” to lenders, so they are offered lower interest rates. A good credit score typically starts at 690 and can move up into the 800s.3 If you don’t know your score, check with your bank or credit card company to see if they offer free access. If not, there are a plethora of both free and paid credit monitoring services you can utilize.

If your credit score is low, you can take steps to improve it, including:4

  • Correct any errors on your credit reports, which can bring down your score. You can access reports for free by visiting AnnualCreditReport.com.
  • Pay down revolving debt. This includes credit card balances and home equity lines of credit.
  • Avoid closing old credit card accounts in good standing. It could lower your score by shortening your credit history and shrinking your total available credit.
  • Make all future payments on time. Payment history is a primary factor in determining your credit score, so make it a priority.
  • Limit your credit applications to avoid having your score dinged by too many inquiries. If you’re shopping around for a car loan or mortgage, minimize the impact by limiting your applications to a short period, usually 14 to 45 days.5

Over time, you should start to see your credit score climb — which will help you qualify for a lower mortgage rate.

2. Keep steady employment.

If you are preparing to purchase a home, it might not be the best time to make a major career change. Unfortunately, frequent job moves or gaps in your résumé could hurt your borrower eligibility.

When you apply for a mortgage, lenders will typically review your employment and income over the past 24 months.5 If you’ve earned a steady paycheck, you could qualify for a better interest rate. A stable employment history gives lenders more confidence in your ability to repay the loan.

That doesn’t mean a job change will automatically disqualify you from purchasing a home. But certain moves, like switching from W-2 to 1099 (independent contractor) income, could throw a wrench in your home buying plans.6

3. Lower your debt-to-income ratios.

Even with a high credit score and a great job, lenders will be concerned if your debt payments are consuming too much of your income. That’s where your debt-to-income (DTI) ratios will come into play.

There are two types of DTI ratios:7
1) Front-end ratio — What percentage of your gross monthly income will go towards covering housing expenses (mortgage, taxes, insurance, and dues or association fees)?

2) Back-end ratio — What percentage of your gross monthly income will go towards covering ALL debt obligations (housing expenses, credit cards, student loans, and other debt)?

What’s considered a good DTI ratio? For better rates, lenders typically want to see a front-end DTI ratio that’s no higher than 28% and a back-end ratio that’s 36% or less.7

If your DTI ratios are higher, you can take steps to lower them, like purchasing a less expensive home or increasing your down payment. Your back-end ratio can also be decreased by paying down your existing debt. A bump in your monthly income will also bring down your DTI ratios.

4. Increase your down payment.

Minimum down payment requirements vary by loan type. But, in some cases, you can qualify for a lower mortgage rate if you make a larger down payment.8

Why do lenders care about your down payment size? Because borrowers with significant equity in their homes are less likely to default on their mortgages. That’s why conventional lenders often require borrowers to purchase private mortgage insurance (PMI) if they put down less than 20%.

A larger down payment will also lower your overall borrowing costs and decrease your monthly mortgage payment since you’ll be taking out a smaller loan. Just be sure to keep enough cash on hand to cover closing costs, moving expenses, and any furniture or other items you’ll need to get settled into your new space.

5. Compare loan types.

All mortgages are not created equal. The loan type you choose could save (or cost) you money depending on your qualifications and circumstances.

For example, here are several common loan types available in the U.S. today:9

  • Conventional — These offer lower mortgage rates but have more stringent credit and down payment requirements than some other types.
  • FHA — Backed by the government, these loans are easier to qualify for but often charge a higher interest rate.
  • Specialty — Certain specialty loans, like VA or USDA loans, might be available if you meet specific criteria.
  • Jumbo — Mortgages that exceed the local conforming loan limit are subject to stricter requirements and may have higher interest rates and fees.10

When considering loan type, you’ll also want to weigh the pros and cons of a fixed-rate versus variable-rate mortgage:11

  • Fixed rate — With a fixed-rate mortgage, you’re guaranteed to keep the same interest rate for the entire life of the loan. Traditionally, these have been the most popular type of mortgage in the U.S. because they offer stability and predictability.
  • Adjustable rate — Adjustable-rate mortgages, or ARMs, have a lower introductory interest rate than fixed-rate mortgages, but the rate can rise after a set period of time — typically 3 to 10 years.

According to the Mortgage Bankers Association, 10% of American homebuyers are now selecting ARMs, up from just 4% at the start of this year.12 An ARM might be a good option if you plan to sell your home before the rate resets. However, life is unpredictable, so it’s important to weigh the benefits and risks involved.

6. Shorten your mortgage term.

A mortgage term is the length of time your mortgage agreement is in effect. The terms are typically 15, 20, or 30 years.13 Although the majority of homebuyers choose 30-year terms, if your goal is to minimize the amount you pay in interest, you should crunch the numbers on a 15-year or 20-year mortgage.

With shorter loan terms, the risk of default is less, so lenders typically offer lower interest rates.13 However, it’s important to note that even though you’ll pay less interest, your mortgage payment will be higher each month, since you’ll be making fewer total payments. So before you agree to a shorter term, make sure you have enough room in your budget to comfortably afford the larger payment.

7. Get quotes from multiple lenders.

When shopping for a mortgage, be sure to solicit quotes from several different lenders and lender types to compare the interest rates and fees. Depending upon your situation, you could find that one institution offers a better deal for the type of loan and term length you want.

Some borrowers choose to work with a mortgage broker. Like an insurance broker, they can help you gather quotes and find the best rate. However, if you use a broker, make sure you understand how they are compensated and contact more than one so you can compare their recommendations and fees.14

Don’t forget that we can be a valuable resource in finding a lender, especially if you are new to the home buying process. After a consultation, we can discuss your financing needs and connect you with loan officers or brokers best suited for your situation.

8. Consider mortgage points.

Even if you score a great interest rate on your mortgage, you can lower it even further by paying for points. When you buy mortgage points — also known as discount points — you essentially pay your lender an upfront fee in exchange for a lower interest rate. The cost to purchase a point is 1% of your mortgage amount. For each point you buy, your mortgage rate will decrease by a set amount, typically 0.25%.15 You’ll need upfront cash to pay for the points, but you can more than make up for the cost in interest savings over time.

However, it only makes sense to buy mortgage points if you plan to stay in the home long enough to recoup the cost. You can determine the breakeven point, or the period of time you’d need to keep the mortgage to make up for the fee, by dividing the cost by the amount saved each month.15 This can help you determine whether or not mortgage points would be a good investment for you.

Getting Started

Unfortunately, the rock-bottom mortgage rates we saw during the height of the pandemic are behind us. However, today’s 30-year fixed rates still fall beneath the historical average of around 8% — and are well below the all-time peak of 18.45% in 1981.16, 17

And although higher mortgage rates have made it more expensive to finance a home purchase, they have also eliminated some of the competition from the market. Consequently, today’s buyers are finding more homes to choose from, fewer bidding wars, and more sellers willing to negotiate or offer incentives such as cash toward closing costs or mortgage points.

If you’re ready and able to buy a home, there’s no reason that concerns about mortgage rates should sideline your plans. The reality is that many economists predict home prices to continue climbing.18 So you may be better off buying today at a slightly higher rate than waiting and paying more for a home a few years from now. You can always refinance if mortgage rates go down, but you can’t make up for the lost years of equity growth and appreciation.

If you have questions or would like more information about buying or selling a home, reach out to schedule a free consultation. We’d love to help you weigh your options, navigate this shifting market, and reach your real estate goals!

Sources:

  1. Washington Post –
    https://www.washingtonpost.com/business/2022/08/04/mortgage-rates-sink-below-5-percent-first-time-four-months/
  2. Trading Economics –
    https://tradingeconomics.com/united-states/average-mortgage-size
  3. NerdWallet –
    https://www.nerdwallet.com/article/finance/what-is-a-good-credit-score
  4. Debt.org –
    https://www.debt.org/credit/improving-your-score/
  5. The Balance –
    https://www.thebalance.com/will-multiple-loan-applications-hurt-my-credit-score-960544
  6. Time –
    https://time.com/nextadvisor/mortgages/how-lenders-evaluate-your-employment/
  7. Bankrate –
    https://www.bankrate.com/mortgages/why-debt-to-income-matters-in-mortgages/
  8. NerdWallet –
    https://www.nerdwallet.com/article/mortgages/payment-buy-home
  9. Consumer Financial Protection Bureau –
    https://www.consumerfinance.gov/owning-a-home/loan-options/
  10. NerdWallet –
    https://www.nerdwallet.com/article/mortgages/jumbo-loans-what-you-need-to-know
  11. Bankrate –
    https://www.bankrate.com/mortgages/arm-vs-fixed-rate/
  12. MarketWatch –
    https://www.marketwatch.com/picks/as-mortgage-rates-rise-heres-exactly-how-more-homebuyers-are-snagging-mortgage-rates-around-4-01656513665
  13. Consumer Financial Protection Bureau –
    https://www.consumerfinance.gov/owning-a-home/loan-options/#anchor_loan-term_361c08846349fe
  14. Federal Trade Commission –
    https://consumer.ftc.gov/articles/shopping-mortgage-faqs
  15. Bankrate –
    https://www.bankrate.com/mortgages/mortgage-points/
  16. CNBC –
    https://www.cnbc.com/select/mortgage-rates-today-still-relatively-low/
  17. Rocket Mortgage –
    https://www.rocketmortgage.com/learn/historical-mortgage-rates-30-year-fixed
  18. MarketWatch –
    https://www.marketwatch.com/picks/continuing-home-price-deceleration-heres-what-5-economists-and-real-estate-pros-predict-will-happen-to-the-housing-market-this-year-01659347993

Why Today’s Housing Inventory Proves the Market Isn’t Headed for a Crash

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Whether or not you owned a home in 2008, you likely remember the housing crash that took place back then. And news about an economic slowdown happening today may bring all those concerns back to the surface. While those feelings are understandable, data can help reassure you the situation today is nothing like it was in 2008.

One of the key reasons why the market won’t crash this time is the current undersupply of inventory. Housing supply comes from three key places:

  • Current homeowners putting their homes up for sale
  • Newly built homes coming onto the market
  • Distressed properties (short sales or foreclosures)

For the market to crash, you’d have to make a case for an oversupply of inventory headed to the market, and the numbers just don’t support that. So, here’s a deeper look at where inventory is coming from today to help prove why the housing market isn’t headed for a crash.

Current Homeowners Putting Their Homes Up for Sale

Even though housing supply is increasing this year, there’s still a limited number of existing homes available. The graph below helps illustrate this point. Based on the latest weekly data, inventory is up 27.8% compared to the same week last year (shown in blue). But compared to the same week in 2019 (shown in the larger red bar), it’s still down by 42.6%.

Why Today’s Housing Inventory Proves the Market Isn’t Headed for a Crash | MyKCM

In Scottsdale, there were 1,300 homes for sale at end of July 2019. At the end of July 2022, there were 1,091 homes on the market, coming in at 16.1% lower.

So, what does this mean? Inventory is still historically low. There simply aren’t enough homes on the market to cause prices to crash. There would need to be a flood of people getting ready to sell their houses in order to tip the scales toward a buyers’ market. And that level of activity simply isn’t there.

Newly Built Homes Coming onto the Market

There’s also a lot of talk about what’s happening with newly built homes today, and that may make you wonder if we’re overbuilding. But home builders are actually slowing down their production right now. Ali Wolf, Chief Economist at Zonda, notes:

“It has become a very competitive market for builders where they are trying to offload any standing inventory.”

To avoid repeating the overbuilding that happened leading up to the housing crisis, builders are reacting to higher mortgage rates and softening buyer demand by slowing down their work. It’s a sign they’re being intentional about not overbuilding homes like they did during the bubble.

And according to the latest data from the U.S. Census, at today’s current pace, we’re headed to build a seasonally adjusted annual rate of about 1.4 million homes this year. While this will add more inventory to the market, it’s not on pace to create an oversupply because builders today are more cautious than the last time when they built more homes than the market could absorb.

Distressed Properties (Short Sales or Foreclosures)

The last place inventory can come from is distressed properties, including short sales and foreclosures. Back in the housing crisis, there was a flood of foreclosures due to lending standards that allowed many people to secure a home loan they couldn’t truly afford. Today, lending standards are much tighter, resulting in more qualified buyers and far fewer foreclosures. The graph below uses data from ATTOM Data Solutions on properties with foreclosure filings to help paint the picture of how things have changed since the crash:

Why Today’s Housing Inventory Proves the Market Isn’t Headed for a Crash | MyKCM

This graph shows how in the time around the housing crash there were over one million foreclosure filings per year. As lending standards tightened since then, the activity started to decline. And in 2020 and 2021, the forbearance program was a further aid to help prevent a repeat of the wave of foreclosures we saw back around 2008.

That program was a game changer, giving homeowners options for things like loan deferrals and modifications they didn’t have before. And data on the success of that program shows four out of every five homeowners coming out of forbearance are either paid in full or have worked out a repayment plan to avoid foreclosure. These are a few of the biggest reasons there won’t be a wave of foreclosures coming to the market.

Bottom Line

Although housing supply is growing this year, the market certainly isn’t anywhere near the inventory levels that would cause prices to drop significantly. That’s why inventory tells us the housing market won’t crash.

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