The Challenges of Home Buying in Today’s Market
2021 was a challenging year for home buyers, especially for first time home buyers. Houses coming on the market went quickly and often for tens of thousands of dollars above asking price. In many places throughout the U.S., housing inventories were near or at historic lows, and home inspectors, typically busy in an active market, lost work as many home inspections were waived in the frenzy to close.
First time buyers had the disadvantage of no previous home to sell and no easy way to come up with the extra cash such a hot market demands.
For LGBTQ+ home buyers, the barriers of potential discrimination only added to the stresses of chasing the dream of home ownership.
But that was last year. What changes are expected in 2022?
Mortgage Rates Are Going Up in 2022
For years, mortgage rates have been at historic lows. The average mortgage in 1990 was just above 10%. Go back to 1980 and it was 16.6%. So, you can see that while rates managed to bounce just above and below 3% in 2021, it was a great time to finance a home.
What’s changed? Inflation for one. In the first month of 2022, inflation soared to around 7.5%. Left unchecked, consumer inflation could cause real problems by the end of the year. In response, the Federal Reserve is set to hike interest rates for the first time since 2018. The theory is that higher interest rates will slow down buying, slow down the economy, and as a side benefit, ease pressure on the supply chair, allowing it to fully recover from the damage done during the Covid years.
How does this affect mortgage rates? When the federal funds rate increases, the cost for banks to borrow from other banks gets more expensive. Those higher costs are passed on to consumers in the form of increasing interest rates on borrowing.
Higher interest rates lead to more expensive mortgages. Of course, federal monetary policy is not the only factor influencing the cost of housing, Nevertheless, a change from 3% to 4% on a $200,000, 30-year mortgage can add almost $120/month to your home payment.
Buyer or Seller’s Market?
Experts expect 2022 to remain a seller’s market. Low rates and a limited supply of housing made prices skyrocket last year, and that reality will be slow to change this year.
In 2022 the supply of housing is expected to increase as new construction ramps up to meet demand. Also, foreclosure activity has increased since the moratorium on foreclosures was lifted last year, bringing more homes back into the market. Finally, encouraged by high prices in the recent booming market, some people only now are deciding it’s a great time to sell.
Taken altogether, these forces will lead to a stronger supply of housing in the months ahead. That will make it easier to buy a home and easier to afford one, but not enough to turn the tables and make it a buyer’s market.
Though mortgage rates will rise, it will not be enough to end the hot market. Freddie Mac predicts the 30-year fixed rate mortgage to average 3.6% in 2022.
Historically, that’s still an amazing deal for a home.
The Most Critical Home Buying Tips for 2022
For LGBTQ+ couples planning to buy a home in 2022, the most critical things to consider are:
Know what you can afford. Be aware of all the costs associated with home ownership and stand by the limitations of your finances, regardless of how attractive a particular property may seem.
Get Preapproved. Getting prequalified is not the same as preapproval. One way to think of it is that prequalification is a guess and preapproval is a definite answer. When you are preapproved, you have the resources for the loan you want.
Find the Right Help. Build your home buying team. You need a real estate agent, a bank or loan specialist, a title search company, an appraiser, insurance agent, and a home inspector. Make sure you meet them all personally, are comfortable with them all, and know that they are on your side.
Know Your Rights. Discrimination against LGBTQ+ couples is not as great as it used to be, but there is reason for concern. If you believe you’ve been a victim of housing discrimination, then you can take action by speaking with your attorney, filing a complaint with the department of Housing and Urban Development or the Consumer Financial Protection Bureau. Other agencies and organizations that may be able to help include the Lamba Legal Help desk and the American Civil Liberties Union.
The special challenges faced by LGBTQ+ couples are best handled by real estate professionals experienced in this growing market.
That’s what the LGBTQ+ Real Estate Alliance is all about. The Alliance’s website connects you with housing and real estate professionals, nationwide, from Real Estate Agents and Lenders to HUD Consultants and Tax Advisors.
First Time Homebuyer Guide
At the LGBTQ+ Real Estate Alliance, we’ve prepared a 40+ page guide, the “First-Time Homebuyer Guide.”
The First Time Homebuyer Guide includes a range of information, all the way from the research phase and finding a loan to the “Impact of Home Ownership on Your Long-Term Financial Security.”
Find the Help You Need
The LGBTQ+ Real Estate Alliance, a 501(c)6 organization, was launched in June 2020 by leading members of the real estate industry. The mission of the Alliance is to Advocate, Elevate, and Celebrate. The Alliance advocates for fair housing for all and promotes LGBTQ+ homeownership.