Just when you thought house prices couldn’t go up any further, well, they did. In July, home prices rose 19.7% from a year earlier, according to the S&P CoreLogic Case-Shiller Index. This is up from 18.7% the month before, and it also represents a record for the index.
For sellers, this is clearly great news. But that leaves buyers in a pretty tough spot.
6 simple tips to get a 1.75% mortgage rate
Secure access to The Ascent’s free guide that reveals how to get the lowest mortgage rate on your new home purchase or when refinancing. Rates are still at their lowest for decades, so act today to avoid missing out.
By submitting your email address, you consent to our sending you money advice as well as products and services which we believe may be of interest to you. You can unsubscribe anytime. Please read our privacy statement and terms and conditions.
The struggle to buy
Today’s home buyers face two interrelated challenges. First, there is a lack of housing available on the market. Second, house prices are skyrocketing.
It is largely the first situation that causes the second. Whenever a given product is in short supply, its price tends to go up – think Economy 101.
What makes matters worse in today’s housing market is the fact that mortgage rates have remained near all-time lows all summer. So buyers were even more motivated to fight against limited inventory so that they could get affordable home loans before those rates started to climb.
Should you try to buy a house this year?
Unless you really have a very flexible budget, buying a home this year can be difficult. The housing stock has increased slightly in recent months. But the market is still down by millions of homes compared to the number needed to meet buyer demand. And until inventories rise, home prices will likely stay high.
This means that if you’re struggling to find a home that you can afford, you may want to postpone your search until 2022. At some point next year, more homes could hit the market, this being the case. which could give you more options to choose from and, just as important, lower the prices.
Even if you can affording a home at today’s inflated prices, buying one might not be the smartest financial decision. Suppose you decide to buy a house for $ 500,000 that you know would normally sell for $ 400,000. You may be able to comfortably pay your mortgage payments based on this higher purchase price. But what if your situation changes and you have to move in a few years? At this point, you may only be able to sell your house for close to $ 400,000.
In fact, if you are currently in a stable housing situation – for example, you own a house and are looking to expand it, or if you are renting but have the option of renewing your lease on a monthly basis – then he could pay to stop looking for a new home now and resume your search in six months. We might see more homes coming onto the market early in the spring season, which is when stocks tend to increase in general.
Many sellers can now hold onto their homes due to general economic uncertainty and related to the pandemic. If the economy continues to improve and the COVID-19 outbreak becomes less severe, we could see an influx of listed homes in the spring of 2022. Mortgage rates will likely stay low during this time, so waiting to buy is a decision that could really pay off in the long run.