Executive on how homebuyers who need to move now can find optimism in the outlook
While purchasing a property may be a daunting prospect at present for many Americans thanks to high mortgage rate and home prices, plenty of so-called situational buyers – those moving because of a need to upsize for family reasons, or due to work – remain determined to push ahead in the current market.
An IPX 1031 survey at the beginning of the year found relocation, upsizing and investment remained the three top reasons motivating Americans to buy a home, even amid general pessimism about their prospects in a difficult climate.
Despite the hurdles presented by high borrowing costs, there are still many ways to make a purchase work for those buyer types, according to a leading Brooklyn-based mortgage professional.
Kevin Leibowitz (pictured top), chief executive officer and founder at Grayton Mortgage Inc., told Mortgage Professional America that the New York market was seeing plenty of buyers whose living circumstances necessitated a move, regardless of the outlook.
“Especially in some places in New York City, you have people [with] babies in a one-bedroom, or two-bedroom with one bath,” he said. “But as soon as the kids start becoming bigger, that just doesn’t work, and one needs to do something.”
“Interest rates or no interest rates – people are interested in changing their living situation, or moving into someplace where they’re looking forward to the school districts. There’s situational-based life which is, irrespective of interest rates, driving people’s housing choices and all of that being equal, people want to own versus rent. So, we’re still seeing a fair amount of activity.”
Borrowers finding room for optimism in the current high-rate environment
It’s no secret that interest rates are still high, squeezing affordability for many buyers and narrowing the range of properties they can set their sights on.
Still, for those so-called situational-based buyers, moving is a necessity rather than a choice. Leibowitz used the example of having to stop for gas while driving to illustrate the reality for that buying cohort: something that needs to be done, irrespective of whether the price is favorable or steep.
Brokers and buyers can’t control interest rates – and instead need to focus on the factors they can influence themselves, he argued.
“What I tell my clients to focus on is: ‘Look: can you afford this payment?’ You can control the payment on your purchase based on the amount that you have to put down and the size of the purchase.
“That’s about all we can focus on, not the interest rate. And if the interest rates do improve, that’s when we have a refinance boom. I tell my clients, ‘If a year from now interest rates are 1% lower and I call you and say, hey, how would you like to save 1% on half a million or a million, or whatever amount you’re borrowing?’ Most clients will say, ‘Yes please.’”
Brighter times ahead for the US mortgage market
For situational buyers, the here and now is the most important thing – and while it may seem a daunting prospect in the short term, the overall picture is much rosier once that purchase has been made, according to Leibowitz.
That’s because while two components – real estate taxes and insurance costs – can increase over the lifetime of a loan, for fixed-payment mortgages, which dominate the market, see monthly payments remain unchanged throughout the duration.
Kris Radermacher from K2K Mortgage in Florida discusses the escalating homeowners insurance costs and property taxes, which are compounding affordability challenges for residents.https://t.co/UbzBuEvcGB
— Mortgage Professional America Magazine (@MPAMagazineUS) June 20, 2024
The prospect of a refinance at some point down the line when rates fall, meanwhile, is another bright spot on the horizon for those buyer types, Leibowitz said.
“I cannot and will not guarantee a refi X number of months into the future because I don’t have a crystal ball,” he said.
“But if you look at the range and scope of interest rates that were at or near 20-year highs, then you could look at the range of interest rates over the last few decades and realize that we spent a good portion of the time below where we are now – which seems to indicate at some point in the future we should have an opportunity to refinance.”
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