The Beginning of 2023 Saw a Drop In Home Prices

Mortgage rates and home prices let up a bit at the beginning of 2023 causing the new home sales to rise from December 2022 to January 2023. New construction home sales rose 7.2% in January 2023 from December 2022. According to the US Department of Housing and Urban Development and the US Census Bureau this is still down 19.4% from the same time last year. Industry leaders are beginning to see that the housing market is stabilizing.

New single-family houses were at a seasonally adjusted annual rate of 625,000 at the end of 2022, and shot up to 670,000 in January 2023. This still does not come close to the record sales pace in March 2022 which was a rate of 831,000.

Prices of new homes are starting to slow down. The median price for a new home was $465,500 in December 2022 and fell in January 2023 to $427,500. This is .7% lower than it was the same time a year ago which came in at $430,500.

"New home sales prices dropped precipitously in January to the lowest median price since February of last year. While sales are still depressed from a year ago, this shows another crack in the housing market that should benefit potential homebuyers, especially when mortgage rates drop," says Robert Frick, corporate economist at Navy Federal Credit Union.

The existing home inventory is still low, so the new construction home listings are filling the gap according to Kelly Mangold of RCLCO. Builders are being flexible with the prices which make it a bit harder for buyers to find homes on the market to purchase. This coupled with the up and down mortgage rates has not made the market easier for buyers.

"Price adjustments and builder incentives helped to push the sales pace in a positive direction. January had the lowest level of existing home sales in over a decade-and motivated buyers are increasingly seeking new homes because there is limited resale inventory available," says Mangold.

"Mortgage rates are spooking sellers looking to upgrade when they calculate the potential increase in their monthly payments, and the hesitation to put existing homes on the market is allowing new construction homes to have less competition," explains Mangold.

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What To Consider When Purchasing a Second Home

 A second home to many is a vacation home or an investment home.  In order for it to be a smart investment, you should do your research and plan ahead.  So it will not become a financial heartache, here are several things to consider before you purchase a second home.

1. What Will You Use It For?

As mentioned before, a second home can be used for a vacation home or investment and can even be used as a secondary residence for work. You will need to decide what you are using your second home because a lender will need to know.  Investment properties are more risky for a lender while a vacation home or secondary residence are not as risky.  The secondary residency and vacation homes will usually have a lower interest rate than an investment property.

2. How WIll You Finance It?

Unless you have a chunk of cash on hand you will more than likely need to get a loan to purchase your second home.  Remember depending on what you are using your second home for will determine which loan option is right for you.  If you are purchasing a second home as a vacation home, then you will more than likely qualify for a conventional mortgage, secondary mortgage, or a jumbo loan.  If you have a current mortgage and a lot of equity in your primary home, you might be able to obtain a Home Equity Line of Credit (HELOC) or cash-out refinance.

3. Do You Have the Funds?

You want to create a budget to make sure you can afford closing costs as well as ongoing costs that come with owning a second home.  When creating the budget, keep in mind the down payment for a second home is typically a minimum of 25% of the purchase price.  Your debt-to-income (DTI) ratio is 43% or lower in order to qualify for a mortgage for a second home.  As far as homeowner insurance goes, you will need to take out comprehensive insurance on a second home no matter if it is a vacation home or you are renting it as an investment.

4. You Don’t Have To Go It Alone

To make it a bit more affordable and easier for financing, many purchase a second home with friends and family and split the costs.  In order for it to work, you need to treat the arrangement as a business.  Everyone can benefit, gain an asset and save money by splitting the costs.

5. Make a Plan for When It’s Not in Use

A second home might have times when it is not being used, so it is good to have a plan for this time.  If this is a rental income property, you need to come up with a plan if you do not find a tenant right off the bat.  If it is a vacation home, think about renting the home out to other vacationers when you are not using it. If this is the case, there are tons of management companies that can take care of the process.

If you are in the market for a second home, now might be a perfect time for you to purchase one.  Choose a realtor from the area that can help with the process from start to finish.  A local sales agent can be especially beneficial when it comes to vacation homes, as they know the area best.

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FHFA New Credit Score Rules

 The Federal Housing Finance Agency will have new guidelines for credit score models for lenders. These new guidelines will have a positive impact on many that were not approved for a loan in the past. Freddie Mac and Fannie Mae will be given the new guidelines to follow when determining if they can accept a mortgage from a lender.

Money is freed up by Freddie Mac and Fannie Mae when the agencies purchase mortgages from lenders. The lenders will then have more money freed to make home loans. Currently, Freddie Mac and Fannie Mae can only purchase conventional loans that meet certain criteria. These scores and criteria are determined by FHFA and mortgage lenders have been using FICO scores 2, 4, and 5 (these are considered outdated models).

“The mortgage industry didn’t have a choice in the matter. They were essentially forced to use older FICO scores by the FHFA. All other types of lenders have long since moved on from those legacy scoring models,” explains credit expert John Ulzheimer.

Under the new guidelines, lenders can use more up-to-date FICO scores, FICO 10T, and VantageScore. VantageScore is FICO’s direct competitor. Lenders will now only have to proved credit reports for two of the three major credit bureaus. FICO 10T and VantageScore being picked up by the new guidelines is the biggest change in a positive way.

These two sources will gather data from more sources included payments for rent, utilities or cell phone service. VantageScore also requires a shorter credit history, FICO has a six month-minimum for credit history. The source also has scores that show up for 37 million Americans that do not show up under FICO. Surprisingly these that show up only on VantageScore, more than 13 million have a credit score above 620.

Using the updated credit score modeling will also help with the racial homeownership gap. According to the Urban Institute around 53 million Americans do not have FICO scores (when using the older scoring models). Out of these 53 million, 29.5% of Black households and 27.3% of Hispanic households compared to only 16.7% of white households.

If you are in the market for a new home, check with lenders to see when you can take advantage of this updated policy. Meanwhile, choose a Realtor who can help you with the homebuying process.

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Doors for Open-Concept Living

 Creating an indoor-outdoor living space gives you tons of natural light and fresh air and is especially perfect in warmer climates. Just like an open floor plan home, an indoor/outdoor living space is perfect for entertaining and creating additional living space. Today this can be done in most any climate with the innovative glass wall systems that bring in the sunlight and panoramic views. Here are some great reasons why you should consider these great doors.

Folding glass doors are perfect for those who want to let the outdoors in as they are easy to work and let you enjoy the outdoors and indoors all at once. There are tons of glass door designs to choose from with the latest offering more glass and less frame for streamline design and uninterrupted views. Today’s folding door is not like the hard-to-pull bulky doors of yesterday. The folding doors of today have a contemporary simple design with concealed handles and hidden hinges.

“Large opening wall systems bring in natural light and fresh air and also help blur the line between interior and exterior spaces. When choosing a wall system, most customers are looking for products that offer more glass, slim profiles and sleek design,” says Tim Kelting, general manager at LaCantina Doors.

Folding doors are perfect for an open concept living because they open up your indoor space to include your outdoor space. These doors can also create bigger openings than regular patio doors and you can use the whole open space because there are no fixed panels.

“In comparison to traditional sliding doors, folding doors allow you to sacrifice interior space needed to create a pocket. In addition, folding doors are an aesthetically pleasing design element that’s both versatile and functional, making them an optimal solution,” says Kelting.

The latest folding doors by LaCantina Doors come in many looks and different designs. The range of looks will fit most any interior and exterior of your home. The hardware comes in stainless steel, bronze and black hardware finishes and there are several frame choices. The doors come in aluminum, wood, clad wood and vinyl in tons of colors.

You can open up your doors and let the indoor and outdoor space become one in for tons of entertainment space during nice weather. The glass folding doors will also give your interior extra protection from harsh elements with their updated energy efficiency. These glass doors will insulate from both cold and hot temperatures with thermal breaks helping to limit condensation.

“LaCantina’s V2 Folding Door uses a thermally controlled aluminum material, designed for climates where you want to keep either the cold or hot air out. It makes them the perfect choice for all climates and ideal for those months when the doors can be folded wide open to allow for fresh air throughout the home,” explains Kelting.

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