Happy Friday! Welcome to The Realty Report, your go-to source for the latest news and insights on the real estate market. Whether you're a first-time homebuyer, an experienced investor, or simply interested in keeping up with the market trends, we've got you covered.

"Don't wait to buy real estate, buy real estate and wait." - T. Harv Eker

Market Data Update

What’s Going On?

Let’s get to it

• Median home sale prices have declined by 0.6% compared to last year, which is the first time we've seen a decline since 2012.

• Mortgage applications increased by 7.4% from last week after hitting a 28-year low.

• Home showings in January were down 12% from last year.

• Fed Chairman Jerome Powell testified to the Senate that interest rates are expected to be higher than previously anticipated.

• The Federal Reserve Bank of Dallas has warned that home prices may fall by up to 20%.

• National rent rates increased by 0.3% month-over-month in February.

The Breakdown

Let’s talk about the housing market’s inventory situation. Inventory is currently half of what it was before the pandemic, but more than double what it was last year. Confusing, right? Well, the reason for this is none other than interest rates.

Interest rates for mortgages started creeping up above 4% around February 2022. This put pressure on sellers to put their homes on the market while buyer demand was still hot and prices were skyrocketing. But as interest rates go up, buyer affordability goes down. So, now we have more homes up for sale at prices that buyers can’t afford. It's like trying to buy a Ferrari on a lemonade stand budget - not going to happen.

As a result, home prices have taken a bit of a hit. Redfin reports that the median home sale price has fallen compared to last year, marking the first drop in over a decade. The drop hasn't been significant, but we can't ignore the signs of slowing demand. The number of homes sold has been trending downward, and with interest rates expected to rise, sellers are getting antsy. They'd rather cash in on their homes now than risk prices further declining due to higher interest rates later.

While Realtor.com notes that the number of new listings is still lower than last year, we are already starting to see angsty sellers flush the market contributing to rising new listings this year. Additionally, inventory tends to increase during the spring and summer. Both of these factors will likely lead to downward pressure on home prices.

_{Important Note: The above passage is our commentary and opinions about the real estate market, NOT financial advice.} 

Investing Tip Of The Week:

Mastering the DTI Ratio

The debt-to-income (DTI) ratio is a crucial metric that lenders use to evaluate a borrower's ability to manage debt payments. For homebuyers, the DTI ratio is especially important because it determines their eligibility for a mortgage loan.

To assess the DTI ratio for a mortgage application, the lender considers two types of debt: recurring monthly debt and housing expenses. Recurring monthly debt includes items such as credit card payments, car loans, student loans, and any other installment payments. Housing expenses consist of the borrower's monthly mortgage payment, property taxes, and homeowners insurance.

To calculate the DTI ratio, the lender divides the borrower's total monthly debt payments, including housing expenses, by their gross monthly income. For example, if a borrower's total monthly debt payments are $2,000, and their gross monthly income is $6,000, their DTI ratio would be 33%.

Mortgage lenders typically require a maximum DTI ratio of 43% to approve a loan application. However, borrowers with a lower DTI ratio may have an advantage in securing a mortgage with more favorable terms.

To improve your DTI ratio, you can either pay off outstanding debts, increase your income, or reduce your monthly expenses. Keeping a low DTI ratio not only increases your chances of loan approval but also ensures that you can comfortably manage the monthly mortgage payments and avoid financial stress.