Buying a home today is challenging for more reasons than one. First, inventory is extremely limited, so those who are looking for homes might struggle to find properties that meet their needs. But just as significantly, home prices have soared on a national level, making properties less affordable for buyers on a whole.
In fact, home prices rose 15.4% in May of 2021 compared to where they sat a year prior, according to the latest CoreLogic Home Price Index report. That represents the fourth straight month of double-digit growth.
6 Simple Tips to Secure a 1.75% Mortgage Rate
Secure access to The Ascent’s free guide that reveals how to get the lowest mortgage rate for your new home purchase or when refinancing. Rates are still at multi-decade lows so take action today to avoid missing out.
By submitting your email address, you consent to us sending you money tips along with products and services that we think might interest you. You can unsubscribe at any time.
Please read our Privacy Statement and Terms & Conditions.
A problem for buyers
The fact that home prices are way up is definitely working to sellers’ advantage. But buyers are feeling the pain.
In fact, 82% of current buyers surveyed by CoreLogic say that home affordability is a major concern today. And that’s coming at a time when mortgage rates are sitting at such low levels that they’re able, to some degree, to offset today’s higher home prices.
Should you buy now or wait?
Many buyers are eager to purchase a home now because mortgage rates are so competitive, and they know they won’t stay that way forever. The problem, however, is that in some markets, homes are being sold at $100,000 or more over their asking prices. And that’s leaving a lot of buyers out in the cold.
There’s also a substantial shortage of starter homes on the market. That, in turn, is making it harder for first-time home buyers to break in.
Furthermore, a lot of people don’t want to just buy any old home to take advantage of low mortgage rates. In fact, 33% say they’d prefer to hold off or not buy at all rather than sacrifice home features they really want.
So where does that leave you? Well, it depends on how frustrated you’ve grown by the house-hunting process so far.
If you have it in you to keep looking, all the while perhaps padding your savings to buy yourself more options, then there’s nothing wrong with sticking to your search. You never know when the right property might hit the market, and you may get lucky and scoop it up before other buyers come in to outbid you.
On the other hand, once more inventory hits the housing market, home prices should slowly but steadily start to come down. That may not happen this year, but once it does happen, buying a place to live becomes a far more affordable prospect.
And if you’re worried about getting stuck with a higher mortgage rate by waiting, know that the earliest the Federal Reserve may raise interest rates is 2023, so until then, mortgage rates should stay nice and low. Keep in mind that the Fed doesn’t actually set mortgage rates. However, it does influence them.
A tough call
Backing out of the housing market when you’re ready to buy is not an easy thing to do. But given the way home prices have jumped, that’s what makes sense for a lot of people. Ultimately, you’ll need to assess your personal finances, current living situation, and tolerance for house-hunting to determine whether you should keep looking for a home or take an extended break and wait for the market to cool off.
View more information: https://www.fool.com/the-ascent/mortgages/articles/may-home-prices-jump-154-should-buyers-back-off/