Is Now a Good Time to Buy a House? [May 2023 Data]

The most recent Homebuyer.com data indicates that, for first-time home buyers, May 2023 is a good time to buy a house. 

This article provides an unbiased look at current mortgage rates, housing market conditions, and market sentiment. We highlight why two-thirds of renters would buy a home if their lease ended this month. 

We also made an accompanying video on our YouTube channel titled, Is Now A Good Time To Buy A Home? Shown below, we discuss:

1. Mortgage rates are steady in the mid-6s
2. First-time home buyer programs are still available
3. Home buyers outnumber home sellers
4. Home sellers are testing their pricing power

Let’s consider why now is a good time for first-time buyers to buy a house.

Is Now A Good Time To Buy A Home? [May 2023]

Today’s Mortgage Rates Are Steady

The first reason why May 2023 is an excellent time to buy a house is that mortgage rates are primarily steady and likely to drop.

According to Freddie Mac, 30-year fixed-rate mortgage rates averaged 6.41 percent to open the month, and there’s been little movement since. Steady interest rates make it easier to buy your first home and stay within budget.

Rates may move lower through the coming weeks, too.

On May 3, 2023, the Federal Reserve announced a 0.25 percentage point increase in the Fed Funds Rate, its tenth increase to the key rate since last year. Raising the Fed Funds Rate combats inflation. In its post-decision press release, the central banker suggested its fight against inflation is nearing its end.

Inflation is the enemy of low mortgage rates, so although the Fed doesn’t control mortgage rates, its press release helped them drop.

Mortgage rates are also fading on concerns within the banking system.

Turmoil at Silicon Valley Bank, Signature Bank, First Republic Bank, and others lead Wall Street to move money away from risky bets toward lower-risk holdings, such as mortgage-backed bonds. When the quantity of demand for mortgage bonds climbs, fixed-rate and adjustable-rate mortgage rates fall.

For first-time buyers, interest rates go even lower. 

First-Time Home Buyer Discount Programs

Another reason May is a good time to buy a house is that mortgage rates are discounted for eligible first-time home buyers. Plus, new mortgage programs reduce fees for buyers with low credit scores who make a low down payment. 

The mortgage rate discount is part of Fannie Mae and Freddie Mac’s First-Time Home Buyer Mortgage Rate Discount program. The program automatically lowers mortgage rates for low- to moderate-income buyers in all 50 states, regardless of their credit score or down payment.

The program applies to all conventional mortgage loans, including:

• The 3% down payment program HomeReady
• The 3% down payment program Home Possible
• The 3% down payment program Conventional 97
• Fannie Mae HomePath
• All other fixed- and adjustable-rate mortgage loans

For May, Fannie Mae and Freddie Mac also introduced a reduced fee structure for buyers who don’t qualify under the discount mentioned above program. 

The new fee structure favors home buyers with smaller-sized down payments and average- or lower-range credit scores, although nearly all home buyers benefit.

See what your mortgage rate would be here. 

Other government agencies are making homes more affordable as well.

Starting six weeks ago, the Federal Housing Administration reduced its annual mortgage insurance premiums (FHA MIP) by 0.30 percentage points for buyers, lowering monthly payments on FHA-backed loans $300 per year per $100,000 borrowed.

The FHA mortgage insurance premium reduction is the agency’s first time lowering FHA MIP since 2015.

Home Buyers Outnumber Home Sellers

The third reason why May 2023 is a good time for first-time buyers is that the current shortage of homes for sale is expected to exacerbate. 

According to the National Association of REALTORS® and its most recent Existing Home Sales report:

• Each state averages fewer than 20,000 homes for sale
• 65 percent of homes now sell within a month
• The typical home sells in 14% less time compared to the month prior 

Meanwhile, corroborating data from Altos Research shows that 24 percent of MLS-listed homes for sale now go to contract immediately. 

We are in a seller’s housing market.

At the current sales pace, buyers would acquire every MLS-listed home for sale within 2.6 months. New construction homes are more abundant but also scarce.

The supply of new homes is down 2.5 months since last fall.

When the demand for homes exceeds the supply of homes for sale, prices rise. Therefore, buyers should expect higher home prices between now and next season and into next year.

Home Sellers Are Testing Their Pricing Power

The fourth reason why May 2023 is a good time to buy your first home is that the psychology of home sellers has started to shift. Here’s what we mean.

Buying or selling a home is an emotional transaction. Two primary emotions – fear and greed – drive buyer and seller decisions.

In a housing market with declining home prices or a weak U.S. economy, home sellers might feel fearful and reduce their asking price more quickly to avoid losing a sale. 

Conversely, in an upward-trending market, feelings of greed can emerge, which makes it challenging for buyers to get a favorable deal.

Recently, home sellers have grown more confident. 

First, Altos Research data reveals that new home listing prices are increasing faster than the median sales price of all homes, which suggests a rise in seller greed. Next, fewer sellers are reducing their prices, showcasing their growing confidence. 

And finally, today’s home sellers offer fewer concessions, leaving home buyers with fewer ways to lower their interest rate.

However, an interesting finding from Fannie Mae, which regularly surveys housing market sentiment, suggests that most Americans still expect home prices to decline slightly over the next year.

This discrepancy between public opinion and market data implies that some seller fear may still exist. 

Buyers who can capitalize on this lingering fear may get better deals or lower prices while the opportunity lasts. As more people become aware of the recovering market, sellers will gain confidence, and the window for deals will close.

Click to get your mortgage pre-approved now.

You Can Buy A Home Without A Big Down Payment

Some home buyers can’t wait for the perfect home-buying conditions.

• Your lease is ending, and your landlord won’t renew
• You’re moving out of your parent’s home
• You’re ready to buy a pet-friendly home

When it’s time to move, you can’t afford to wait for lower mortgage rates, more money in the bank, or a better selection of houses. The time to buy a home is now.

Thankfully, first-time buyers can achieve their American Dream of homeownership quickly. You don’t need to make a 20 percent down payment to buy a home.

There are over a dozen low- and no-downpayment mortgages for first-time buyers, and local housing offices offer eligible buyers access to down payment assistance programs.

You may even get discounts and deals based on your profession. There are special mortgages for nurses, for example, and mortgages for teachers. There are mortgages for first responders, firefighters, and law enforcement.

In some cases, you can buy a home with a $100 downpayment.

Furthermore, mortgage lenders lowered credit score requirements on government-backed loans to make qualifying more accessible and fair. Congress passed a law that changed how medical debt and credit scores work.

The typical home buyer received a 22-point FICO boost. 

Affordable housing bills can also help, including home buyer tax credits, down payment assistance, and cash grants. 

This video reviews 14 first-time home buyer programs.

14 First-Time Home Buyer Programs [2023 Updates]

What To Do Next: Get Pre-Approved To Buy Your Home

If you plan to buy a home in the coming weeks or months, get a mortgage pre-approval first. 

Mortgage pre-approvals are a dress rehearsal for your home purchase. They use today’s live mortgage rates and market conditions to show how much home you can afford to buy while setting realistic boundaries for your home search and budget.

Every successful purchase starts with a pre-approval, and buyers should get one as early in their home search as possible.

Also: give your credit score a boost. 

Ask for a copy of your credit report and review it for errors. Supplement your monthly bill-paying with a credit-building service such as StellarFi that can work in as few as 30 days.

Every extra point can help.

Third, use the HUD website to research down payment assistance programs in your area. Some programs may have been discontinued or defunded in the new year, so call the local provider to verify availability.

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