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Buckle Up: Spring Rollercoaster Real Estate Market is in Full-Swing Again, But Living in Rochester is Worth It

By Mark Kunzer
Business Development Mortgage Originations Manager, ESL Federal Credit Union

April 2022

Buying a home can be a rollercoaster experience, especially during the “spring boom.” When inventory is low, houses get gobbled up—fast and competitively—and whoever doesn’t get that home keeps looking. If you’ve been a buyer in the spring market, especially last year’s, you get the rollercoaster reference.

But spring 2021 wasn’t our last homebuying rollercoaster rodeo. Buyers are walking into a similar real estate market for 2022.

When I think about what buyers should expect this spring buying season—which unofficially lasts from March to August—what hasn’t changed is the inventory. Similar to 2021, we expect it to be lower, which means multiple offers on quality properties, bidding wars, and a whole lot of competition. This isn’t new: It’s exactly what we saw last year and the year before. But what we are facing new this year is higher interest rates. And that impacts purchasing power and affordability.

Mortgage rates fluctuate, but here is an example to show how a rise in rates has an impact. Between February 2021 and early April 2022, interest rates are up about two percentage points, from 2.75% to 4.75%. The average new mortgage is about $160,000, so a two-percentage point increase adds about $180 per month and $2,100 in interest per year. To that point, someone with a 4.75% interest rate would qualify for about $34,000 less home with the 2.75% rate. So the direction of rates really matters to homebuyers. It’s important to know where you stand and be in touch with your loan officer.

For buyers who were preapproved last year and didn’t buy, it’s time to freshen up your preapproval and see where your purchasing power is today.

If you’re new to the homebuying journey, here are a few things you can do right now to get ready:

  • Get in touch with a loan officer who will manage your preapproval and customize it to the current environment. This includes a merged credit report to give a lens into FICO scores across all three major bureaus.
  • Understand your debt-to-income ratio and know where your down payment and closing costs are coming from. This will help you put together a solid purchase contract when the time comes.
  • Start minimizing your spending so your credit score isn’t impacted.

15,000 homes closed in our six-county region in 2021, and experts—including me—believe this spring’s market will look the same, if not a little lower. If it feels overwhelming and you’re not sure where to start, I always reassure homebuyers that there are programs and grants available, especially for first-time homebuyers. Be sure to confer with your lender about what grant programs may be available for your specific situation.

Two programs ESL is involved in, and has seen success with, are the Homebuyer Dream Program through Federal Home Loan Bank of New York and our own first-time homebuyer grant for Black and Latino residents.

The Homebuyer Dream Program1 allows eligible first-time homebuyers the potential to receive up to $10,000 per household in grant funds, $9,500 to use towards down payment and closing cost assistance, and $500 for homeownership counseling costs.

The ESL First-Time Homebuyer Grant Program2 is for Black and Latino residents in our 10-county footprint. It’s set up to look like the Homebuyer Dream Program, but with a six-month savings period. We expect to help more than 80 new homebuyers this year save for and purchase their own home.

We also have a helpful resource for first-time homebuyers, with a guide for the road—or track loop—ahead.

All this said, it’s become so easy to hop online and look at houses, see inside, check prices and taxes, get excited, and contact a Realtor, but your first step is to get preapproved with a local lender.

To buy a home today, you must be preapproved first. That’s why you need to balance your readiness with the available inventory.

So if you’re ready and serious about buying a home this spring, start with a trusted mortgage lender, and get yourself “mortgage ready.”

Mark brings nearly 30 years of experience to lead external mortgage originations efforts at ESL and oversees a team of relationship managers who work with realtors and other real estate professionals to help provide ESL mortgage solutions.

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1: Homebuyer Dream Program is a service mark of the Federal Home Loan Bank of New York.

2: ESL reserves the right to change the terms and conditions at any time, without prior notice. The Household also fully understands that the limited funds are available on a first-come, first-served basis and even if the Household meets all of the terms and conditions this does not guarantee that there may be funds available at the time that the Household qualifies. ESL, in its sole discretion, may refuse to honor a ESL First-Time Homebuyer Grant funding request. The Household further agrees that any proceeds, which will not be, or cease to be, used for the purposes approved by ESL will be recaptured and the unused, or improperly used, grant will be returned to ESL. The Household will also acknowledge receipt of a copy of these terms and conditions.

The ESL First-Time Homebuyer Grant may be considered taxable income, a pro-rated 1099C will be issued each year, over the five year retention/recapture period. Consult with your tax adviser.

Maximum grant amount of $10,500.