Being in a strong financial position is one of the most important parts of retirement, and downsizing can make a big difference.

“Many downsizers expect to improve their retirement income stream if their new home costs less than what their old house sells for. Lower utility costs, insurance and property taxes — as well as investment returns on the proceeds — can also improve the bottom line.” -New York Times (NYT)

A key part of why downsizing is still cost effective today, even when mortgage rates are higher than they were a year ago, is the record-high level of equity homeowners have. Leveraging your equity when you downsize can lower or maybe even eliminate the mortgage payment on your next home.

So, not only is the upkeep of a smaller home likely more affordable, but leveraging your home equity could make a big difference too. Your local real estate advisor is the best resource to help you understand how much equity you may have in your current home and what options it can provide for your next move.

“U.S. house prices were largely unchanged in the last four months and remained near the peak levels reached over the summer of 2022. While higher mortgage rates have suppressed demand, low inventories of homes for sale have helped maintain relatively flat house prices.”

The data also shows that price depreciation peaked around August. Since then, any depreciation has been even milder. In other words, today’s home prices aren’t in a freefall.

As mortgage rates rose last year, activity in the housing market slowed down. And as a result, homes started seeing fewer offers and stayed on the market longer. That meant some homeowners decided to press pause on selling.

Now, however, rates are beginning to come down—and buyers are starting to reenter the market. In fact, the latest data from the Mortgage Bankers Association (MBA) shows mortgage applications increased last week by 7% compared to the week before.

So, if you’ve been planning to sell your house but you’re unsure if there will be anyone to buy it, this shift in the market could be your chance. Here’s what experts are saying about buyers returning to the market as we approach spring.

Mike Fratantoni, SVP and Chief Economist, MBA:

“Mortgage rates are now at their lowest level since September 2022, and about a percentage point below the peak mortgage rate last fall. As we enter the beginning of the spring buying season, lower mortgage rates and more homes on the market will help affordability for first-time homebuyers.”

Lawrence Yun, Chief Economist, National Association of Realtors (NAR):

“The upcoming months should see a return of buyers, as mortgage rates appear to have already peaked and have been coming down since mid-November.”

Thomas LaSalvia, Senior Economist, Moody’s Analytics:

“We expect the labor market to remain robust, wages to continue to rise—maybe not at the pace that they did during the pandemic, but that will open up some opportunity for folks to enter homeownership as interest rates stabilize a bit.”

To show that home prices don’t fall every time there’s a recession, it helps to turn to historical data. As the graph below illustrates, looking at recessions going all the way back to 1980, home prices appreciated in four of the last six of them. So historically, when the economy slows down, it doesn’t mean home values will always fall.

Most people remember the housing crisis in 2008 (the larger of the two red bars in the graph above) and think another recession would be a repeat of what happened to housing then. But today’s housing market isn’t about to crash because the fundamentals of the market are different than they were in 2008. According to experts, home prices will vary by market and may go up or down depending on the local area. But the average of their 2023 forecasts shows prices will net neutral nationwide, not fall drastically like they did in 2008.

The 2023 forecast from the National Association of Realtors (NAR) sets an optimist tone:

“While 2022 may be remembered as a year of housing volatility, 2023 likely will become a year of long-lost normalcy returning to the market, . . . mortgage rates are expected to stabilize while home sales and prices moderate after recent highs, . . .”

LISTED FOR SALE BY NELA HOMES, INC:  6 Vista Real Drive, Rolling HIlls Est 90274 

OFFERED FOR SALE AT $2,098,000

Beautiful Rolling Hills Estate, steps away from the prestigious Rolling Hills Country Club. Located on a cul-de-sac that features scenic, charming streets surrounded by huge trees and lavish landscaping. This is a single story, mid-century home, with three bedrooms, three and a half baths, and a magnificent patio space.

This gem offers exceptional lighting, two living rooms / lounging areas; a dining area, and a kitchen with a large island that seats 4+ people. This is a perfect home for an entertainer! Located in a beautiful neighborhood, near lots of restaurants, shopping, & entertainment. Come and see why this neighborhood has become such a premium commodity!

Did the frequency and intensity of bidding wars over the past two years make you put your home search on hold? If so, you should know the hyper competitive market has cooled this past year as buyer demand has moderated and housing supply has grown. Those two factors combined mean you may see less competition from other buyers.

And with less competition comes more opportunity. Over the last two years, more buyers were willing to skip important steps in the homebuying process, like the appraisal or the inspection, in hopes of gaining an advantage in a bidding war. But now, things are different.

The latest data from the National Association of Realtors (NAR) shows the percentage of buyers waiving their home inspection or appraisal is down. And a recent article from realtor.com points out more sellers are accepting contingencies:

“A year ago, sellers were calling all the shots and buyers were launching legendary bidding wars, waiving contingencies, and paying for homes in cash. But now, the shoe is on the other foot, and 92% of home sellers are accepting some buyer-friendly terms (frequently related to home inspections, financing, or appraisals), . . .”

LISTED FOR SALE BY NELA HOMES, INC:  6221 Mt. Angelus Place, Los Angeles 90042

OFFERED FOR SALE AT $1,295,000

GREAT OPPORTUNITY TO BE PART OF ONE OF THE MOST EXCLUSIVE AND SECLUDED AREAS IN HIGHLAND PARK, Mount Angelus. This hilly and picturesque neighborhood of about 150 charming homes is one of the most sought-after areas in all of Highland Park.

The main house, with its three bedrooms and two bathrooms, master bedroom, walking closet, master bathroom, and indoor washer and dryer hookups, sits on a single level above the one-car garage and a small studio with a separate street entrance. This studio features a bathroom and a comfortable walking closet. The house is PERFECT FOR A MID-CENTURY MODERN RENOVATION. Have some guests over to stay in the second studio/in-law-quarter/JR ADU in the back of the house, this back studio features one bedroom and one bathroom with a small kitchenette and a large closet area. The one-car garage is deep with enough space for a small to medium size car, PLUS it has many built-in cabinets perfect for a shop or studio.

The large lot crosses from street to street with two separate entrances. The terrace-like garden is perfect for the gardener enthusiast. If you need more storage space, the house has a spacious storage structure.

The 2022 housing market has been defined by two key things: inflation and rapidly rising mortgage rates. And in many ways, it's put the market into a reset position.

As the Federal Reserve (the Fed) made moves this year to try to lower inflation, mortgage rates more than doubled – something that’s never happened before in a calendar year. This had a cascading impact on buyer activity, the balance between supply and demand, and ultimately home prices. And as all those things changed, some buyers and sellers put their plans on hold and decided to wait until the market felt a bit more predictable.

But what does that mean for next year? What everyone really wants is more stability in the market in 2023. For that to happen we’ll need to see the Fed bring inflation down even more and keep it there. Here’s what housing market experts say we can expect next year.

What’s Ahead for Mortgage Rates in 2023?

Moving forward, experts agree it’s still going to be all about inflation. If inflation is high, mortgage rates will be as well. But if inflation continues to fall, mortgage rates will likely respond. While there may be early signs inflation is easing as we round out this year, we’re not out of the woods just yet. Inflation is still something to watch in 2023.

Right now, experts are factoring all of this into their mortgage rate forecasts for next year. And if we average those forecasts together, experts say we can expect rates to stabilize a bit more in 2023. Whether that’s between 5.5% and 6.5%, it’s hard for experts to say exactly where they’ll land. But based on the average of their projections, a more predictable rate is likely ahead (see chart below):

That means, we’ll start the year out about where we are right now. But we could see rates tick down if inflation continues to drop. As Greg McBride, Chief Financial Analyst at Bankrate, explains:

“. . . mortgage rates could pull back meaningfully next year if inflation pressures ease.”

In the meantime, expect some volatility as rates will likely fluctuate in the weeks ahead. If we see inflation come back under control, that would be good news for the housing market.

If you’re a homeowner, your net worth got a big boost over the past few years thanks to rapidly rising home prices. Here’s how it happened and what it means for you, even as the market moderates.

Equity is the current value of your home minus what you owe on the loan.

Because there was a significant imbalance between the number of homes available for sale and the number of buyers looking to make a purchase over the past few years, home prices appreciated substantially.

And while home price appreciation has moderated this year, and even depreciated slightly in some overheated markets, that doesn’t mean you’ve lost equity you gained during the pandemic frenzy.

Homeowners have very high levels of tappable home equity today, providing a cushion to withstand potential price declines, but also preventing housing distress from turning into a foreclosure.

Despite the headlines, the average homeowner still gained positive equity over the last year in just about every market. While the gains aren’t as dramatic as they were in the previous quarter due to home price moderation, they’re still significant. And if you’ve been in your home for longer than a year, chances are you have even more equity than you realize.

Discover this charming remodel 2015 built with an ADU, front house offering 1,200 SF of living space with 3 bedrooms and 2.5 baths. Modern finishes splashed throughout and flooded with natural light.

First floor is an open space that flows between living, dining, and kitchen areas with one half bath and laundry closet. Second level renders 3 bedrooms, 2 baths with generously sized windows for the enjoyment of surrounding mountain views. One of the bedrooms offers an en suite bath.

The back home offers an open floor plan, 2 bedrooms and 2 bath 1923 bungalow with tons of charm. Conveniently single story with a private backyard and detached bonus/creative space. Truly a rare find. 4 parking spaces dedicated and delivered vacant at close.

Stunning Spanish Revival Home in Pasadena circa 1923. This single story Spanish residence features modern amenities and is located in the serene tree-lined neighborhood of Pasadena.

The interior strikes a perfect balance between vintage character and contemporary updates. The living room and dining area offer a warm and light filled environment for entertainment with a charming side courtyard. This well thought design is complimented with European white oak floors, marble countertops, and traditional wood windows.

The expansive 10,801 square foot lot possess mature trees and lush landscaping, along with several entertaining areas. In addition, the property has an easy access driveway and private garage.

Ann acted as buyer's agent in the successful sale of 2130 Sunset #54.  Ownership changes lives – it’s that simple. It provides stability, more stake in the community, and a greater sense of pride and accomplishment.

We connect clients with opportunities!

Although defining escrow can be difficult, basically the process of escrow is this: Buyers and sellers deposit documents and money with a neutral third party to be held. When certain conditions agreed upon by both buyer and seller are met, the third party (the "escrow holder") then distributes the documents and the money.

 The escrow holder works for both the buyer and the seller, and can act only according to specific written instructions given by both parties. The steps followed by an escrow officer in a conventional transaction might be as follows:

• Receive buyer's initial deposit and prepare escrow instructions. Obtain all signatures.
• Order title search and receive preliminary title report.
• Distribute copies of preliminary title report to all parties and obtain approval.
• Request "demands" (that is, pay-off statements) from existing lenders.
• Obtain seller's signature on grant deed. Hold grant deed until all terms are meet, and all money is deposited.
• Calculate prorations on property taxes, rents, insurance, or other expenses as required.
• Coordinate with buyer's lender. Order and process buyer's loan documents.
• Receive buyer's down payment funds and request funds from buyer's lender.
• Order recording of grant deed to buyer and distribute all funds: Pay-off existing loans; pay required costs, such as termite completion; release net proceeds to seller.

Most purchase contracts will require that the buyer apply for financing within a few days after acceptance of the buyer's offer. Knowledgeable real estate agents will arrange for buyers to be "pre-qualified" by a lender before finalizing any purchase contract.
So, at the same time the escrow officer is engaged with instructions, title searches, and demands; the buyer and the buyer's lender are busy with the loan approval process.
The steps followed by the loan officer processing the application might be as follows:

• Obtain and review the buyer's credit report. Obtain satisfactory explanations from the buyer of any negative items.
• Verify other credit reference items, such as rent payments to a landlord.
• Verify the buyer's sources of income.
• Verify that the buyer has adequate liquid funds for his or her down payment, closing costs, and reserves.
• Obtain all supporting documentation from the buyer.
• Order an appraisal of the property, and confirm that the property's value is equal to the purchase contract sales price.
• Obtain buyer's signatures on federally required Truth-In-Lending documents.
• Submit the loan to underwriters for final approval.
• Coordinate delivery of the buyer's loan documents to the escrow officer.

While the escrow officer, loan officer, and buyer are handling their duties, the seller also has tasks to perform. These tasks may be as follows:

• Prepare detailed disclosures regarding the property's condition, including copies of warranties, permits or repair invoices for work previously done on the property.
• Make home available for physical inspection by contractor, geologist or other tradespeople as required by the purchase contract.
• Give escrow officer information on existing loans to check against title search findings.
• Make home available for inspection by licensed termite company.
• Make home available for inspection by lender's appraiser.
• Make any repairs agreed upon in purchase contract.
• Make home available for completion of any required termite work.

As your real estate agent,  it is my job to see that all participants are performing their tasks correctly and on time; so that your escrow proceeds smoothly and closes successfully.

As buyer's agent, Ann successfully negotiated on behalf of the buyer in the sale of 2130 Sunset #54.  Ann supports her clients with insight on today's housing market and expert advice on how to submit a strong offer at a fair price.

We connect clients with opportunities!