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Housing Market Changes in 2020 and Beyond

The Flux in Homeownership Opportunities

Housing Market Changes in 2020 and Beyond | Wescom Credit Union

According to Washington Post interview with the National Association of Realtors (NAR), home sales set records last year, due in part to the COVID-19 pandemic. Final data for 2020 had not yet been released at the time of the interview, but the trade association for real estate agents expect new home-sales rose 20% over 2019.

What’s more, this trend wasn’t isolated to 2020. NAR predicts new-home sales will increase by 21% in 2021. The increase in consumers looking to purchase a home means a decrease in the supply of houses available to sell. At the same time, rates on mortgage loans reached historical lows in 2020. Those two factors combined to cause a rise in the cost of homeownership.

According to an article by The Ascent — a Motley Fool Service — a housing shortage is a driving factor in California's astronomical real estate prices. Consulting firm McKinsey estimates that the state needs to add 3.5 million homes by 2025 to help alleviate the shortage and make homes more affordable. The median home value in Los Angeles is $752,508 – and $697,203 in the expansive Los Angeles-Long Beach-Anaheim. This increase in home value is great news for existing homeowners, as it has boosted their wealth accumulation. However, this trend also reveals a decline in housing affordability and could “limit future homeownership opportunities for young adults if housing supply is not greatly increased,” according to the Washington Post article.

Preparing to Purchase a Home

Are you ready to purchase a house — or are you not so sure? Here are a few suggestions from The Mortgage Reports.com to help you prepare for this monumental purchase:

  1. Check your credit — Ideally, consumers should check their credit at least six to 12 months before they consider purchasing a house to allow time to mediate a low credit score if necessary. Your credit determines whether you’re eligible for a mortgage and influences your rate. Most mortgage programs require a minimum credit score between 580 and 620.
  2. Save money — Common advice is to pay a 20% down payment for a home to avoid paying mortgage insurance. But even if you decide to take the mortgage insurance option, most mortgage programs require of a down payment of 3% to 5%. It’s important to remember that the consumer is also responsible for closing costs – roughly 2% to 5% of the loan amount.
  3. Determine your budget — It’s important to understand how much house you can reasonably afford before start looking. Before even meeting with a mortgage lender, use one of Wescom’s online mortgage calculators to estimate affordability. Once you know how much you can afford, be sure to also calculate how much you’ll need to have on-hand as a down payment.
  4. Don’t rush — Buying a home is a huge decision – and one that shouldn’t be rushed. If you move too fast, you could overlook vital steps that could save you money, including home inspection and comparison shopping. Don’t end up with a fixer-upper when you thought you were buying a turn-key home!

For more information about Wescom Mortgages, click here.

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