Anyone who’s been in the market for a new home can tell you that housing prices have soared over the past year. In fact, home prices have climbed so high they’ve hit a record.
In May, home prices were 16.6% higher than they were in May of 2020, according to the S&P CoreLogic Case-Shiller index. That’s the highest reading in over 30 years. It’s also higher than April’s reading, which showed 14.8% year-over-year home price growth.
Among the 20 cities tracked by the index, Phoenix, San Diego, and Seattle saw the highest gains. Here’s where they landed:
What’s more, five cities — Cleveland, Dallas, Denver, Seattle, and Charlotte — saw their highest year-over-year gains ever.
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Is it a good time to buy a home?
Seeing as how we just saw that home prices have reached a record high, the answer to that question may be “no.” But that doesn’t tell the whole story. Mortgage rates are sitting near historic lows right now — so what buyers today lose by having to pay more for a home, they could gain in the form of competitive interest rates.
But record-high home prices aren’t the only barrier to buying a home today. Housing inventory is extremely limited these days compared to the number of homes for sale a year ago. That alone might put some buyers in a position where they’re forced to put their house-hunting on hold.
The benefit of waiting
Housing inventory may be low, but it rose slightly in June. And if more home listings continue to hit the market, prices could start to drop.
A big reason home prices have been so high is that many of the homes for sale in today’s market have wound up in bidding wars. In a bidding war, two or more buyers attempt to get their offers accepted by increasing the amount they’re willing to pay for a home. Or, to put it another way, sellers commonly wind up with more than their asking price when bidding wars come into the mix. That’s contributed to May’s record-breaking home prices. But bidding wars could also become less common as more homes go up for sale.
Now the one downside of waiting to buy a home is potentially losing out on the chance to lock in a competitive mortgage rate. But there’s some good news in that regard. Mortgage rates are likely to stay low well into 2022, and possibly beyond. They may rise slightly from today’s levels, but they should remain competitive on a historical basis. Buyers who put their home searches on pause until, say, early 2022 may benefit from more inventory, lower home prices, and attractive mortgage rates.
Waiting to buy has additional benefits, too. It gives home purchasers a chance to sock away more funds for a down payment to give themselves more options at a time when inventory may be somewhat better, but not abundant. And, it gives them time to work on boosting their credit scores, which is essential for qualifying for a low interest rate on a mortgage.
View more information: https://www.fool.com/the-ascent/mortgages/articles/may-home-prices-broke-record-as-per-key-index/