Homebuyers have a lot to be thankful for this holiday season. Interest rates remain low. The Federal Reserve hasn't dumped its portfolio of mortgage-backed securities. The U.S. economy has strengthened, jobs are more plentiful, and home prices have stabilized.
Add it all up and one clear conclusion is that homebuyers "basically aren't getting as hosed as they were before," says Nela Richardson, chief economist at Redfin, a real estate brokerage in Seattle.
Here are five things homebuyers should be thankful for this Thanksgiving:
No. 1: Mortgage rates
Mortgage rates were expected to rise throughout 2014. But that didn't happen. Instead, Richardson explains, buyers got "a late-year surprise that mortgage rates actually fell from earlier this year."
Lower rates mean buyers have had "repeated opportunities to finance homes at near historic levels and stretch their weak income dollars further than they might have otherwise," says Keith Gumbinger, vice president at HSH.com.
HSH.com’s Two-Month Forecast for Mortgage Rates
No. 2: The Fed
Another favorable development was that the Federal Reserve decided not to sell off its $1.7 trillion of mortgage-backed securities.
"That is contributing to rates staying low longer and they won't rise as quickly," Richardson says.
Steady rates make shopping for a home and locking in a mortgage rate easier for homebuyers, says Danielle Hale, director of housing statistics at the National Association of Realtors in Washington, D.C.
"The Fed has been telegraphing what they are going to do and the (financial) markets seem to think they are following through reasonably consistently. That helps to keep interest rates relatively steady," Hale says.
The benefit for buyers is that when they lock their mortgage rate it's more likely to be identical or similar to the rate available when they first inquired about a loan.
No. 3: Jobs
Homebuyers can also be thankful for the U.S. economy.
"We have a growing economy," Gumbinger says. "You can look around the world and find plenty of places where that is not the case or not very much the case."
Two beneficial side effects of economic growth have been job creation at a pace of about 200,000 new positions each month and declining unemployment, Gumbinger adds.
Though wages have lagged, "an active job market that is constantly adding jobs means more opportunity for everyone," Hale says. "When you buy a home, you're thinking long term, so knowing there is an active job market improves the stability of your situation and your opportunities if your (job) situation does need to change."
No. 4: Home prices
Buyers might well be dismayed at higher home prices, but there's still an upside.
"Instead of the double-digit year-over-year increases we saw in 2013, increases have cooled off to around 5-to-6 percent and have been generally cooling as this year has gone on," Gumbinger says.
That moderate price appreciation is "the ideal situation" for buyers because it's positive and predictable, Hale explains.
"If you're buying an asset, you want to see that it will be able to hold its value, but you don't want to see double-digit price increases so the house you looked at a month ago that was within your budget is now outside your budget because the price went up too quickly," she says.
No. 5: Homeowner equity
Higher home prices also mean more homeowners have positive equity. Rather than being upside-down, their home is now worth more than they owe on their mortgage.
That puts them in a stronger position to sell, giving buyers more homes from which to choose.
"The big story of 2013 was lack of inventory," Richardson says. "Now that (price increases) have started to slow, we are starting to see a pickup in homes for sale."
That trend could continue, judging by a recent NAR survey that found a sizable percentage of sellers had delayed their move due to negative equity.
"Seventeen percent of sellers from July 2013 to June 2014 (said they) wanted to sell earlier, but were stalled because their home was worth less than their mortgage. That figure was 13 percent in 2013, so there is some evidence that sellers will delay a home sale when the home is worth less than their mortgage," Hales says. "As prices continue to rise at a more gradual pace, we should see even more people in a position where they don't have to delay any longer."
The bottom line for buyers is that the remaining weeks of 2014 is a great time to purchase a home.
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How long do I have to own or live in my home to qualify for the capital gains tax exclusion when I sell?You can exclude capital gains on the sale of your primary residence if you meet the IRS's ownership and use requirements.
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