It’s been a tough go for prospective home buyers. And those looking to sell their homes actually don’t have it so easy, either.
Mortgage lenders have been charging eye-watering rates. Granted, today’s rates aren’t the highest they’ve ever been. But they’re the highest rates we’ve seen in over two decades.
Because of how high rates are, it’s been difficult for buyers to afford a home. And it’s been difficult for current homeowners to make a move.
After all, many people signed mortgages or refinanced to rates in the 3% range in 2020 and 2021. Who wants to swap a rate like that for a rate that’s around 8%?
Unfortunately, it’s unlikely that housing market conditions will improve for buyers in November. Here are a few things to expect.
1. Mortgage rates will stay high
In late October, the average 30-year mortgage rate was about 8%, as per Freddie Mac. And rates could rise even more in November.
Even if they don’t, we’re unlikely to see rates fall. And that could keep a lot of buyers out of the market and keep would-be sellers from listing their homes.
For context, the principal and interest payment on a $200,000, 30-year mortgage at 3% is $843. The principal and interest on that same loan at 8% is $1,468. That’s not quite double, but it’s a lot more.
2. Home prices will remain high
The National Association of Realtors (NAR) reports that in September, the average existing home sold for $394,300. That’s a 2.8% increase from a year prior.
Home prices may not rise much in November since, if anything, buyer activity tends to slow down toward the end of the year. If there’s no increase in demand, we may not see an increase in home prices.
But home prices are also unlikely to come down. So buyers shouldn’t expect much relief.
3. Housing inventory will remain low
Nobody wants to sell a home right now unless they’re somehow able to take their proceeds and buy a replacement home outright in cash. Buyers are just really turned off by today’s mortgage rates. Because of this, we’re unlikely to see more homes hit the market in November.
Meanwhile, as of late September, there was only a 3.4-month supply of available homes on the market, per the NAR. It commonly takes a four- to six-month supply of homes for there to be enough inventory to satisfy buyer demand. In fact, it’s this lack of inventory that’s keeping home prices up at a time when you’d expect them to be falling due to higher mortgage rates.
Tough times all around for the housing market
All told, November is apt to be a hard month to buy. And while sellers can benefit from a lack of competition, they’re in the same boat as buyers when it comes to looking at expensive borrowing rates for a new home.
If you’re going to try to buy a home in November anyway, crunch your numbers carefully and aim for total housing costs that don’t exceed 30% of your take-home income (your paycheck minus deductions). That 30% should include your mortgage payment, property taxes, homeowners insurance, and HOA fees, if applicable — basically any recurring, predictable expense associated with owning your home.
Going beyond that limit is risky. Taking on higher housing costs might put you at risk of falling behind on home-related bills or other expenses that are essential. So if you can’t stick to that limit, it may be best to put off homeownership until market conditions are more favorable.
