As rising mortgage rates affected home sales, many “Zoom in Cities “- areas that flourishedThanks to the influx of remote workers – we’re seeing their housing markets cool. This leads sellers to get creative and gives buyers a little leverage in finding a home.
One new strategy making headway is: “buying a mortgage,” which can help buyers put a mortgage rate just under 6% or 7% interest on most home loans today.
Taylor Marr, deputy chief economist at Redfin, explained how this works on CBS News Mornings. In a “2-to-1” purchase, which is a common arrangement, the buyer can lock in a lower rate for the first two years of the loan by putting up additional money.
“If you’re buying a $500,000 home, you might be putting an extra $10,000 or $20,000 toward paying down the mortgage rate temporarily,” he said. “If you’re getting a 6% mortgage rate, you actually get 4% the first year. And then it goes up to 5%, then 6%,” he said.
“It can be a great way to buy a home if your income is rising quickly. But you have to put more money up front,” Marr added.
Buy-ins are becoming more popular in some areas where home sales are slowing, but it’s just one of several concessions sellers can make to push a deal through the line. Marr said other localities could include paying some money for repairs or offering to pay the buyer’s closing costs.
In fact, sellers offered a record share of franchises in the last three months of 2022, according to Redfin data. About 42% of the company’s dealership sales involved franchising, according to a recent post Report. Some sellers are also forced to lower prices outright, with Marr noting that about half of recent home sales closed below asking price.
Redfin has found that franchises are most popular in the West. Nearly three-quarters of San Diego home sales were franchised last quarter, followed by Phoenix, Portland, Las Vegas and Denver.
“The pandemic-fuelled housing market frenzy was concentrated in a lot of these pandemic boomtowns that were mostly out west,” Marr said. “These are the same markets that cooled quickly when… [interest] Rates have gone up. They are increasingly having to make compromises so buyers can buy a home.”
Mortgage rates have nearly doubled where they were in early 2022 as the Federal Reserve raised interest rates in an effort to tame inflation. The run-up to the surge added hundreds of dollars to the typical monthly payment for prospective homebuyers and drove home sales to their lowest level in recent years. eight years.