Home prices hit record high, soar 19.7%
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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.
The struggle to buy
Today’s homebuyers 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.
While you can afford a house 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 hang on to 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.
A historic opportunity to potentially save thousands on your mortgage
There is a good chance that interest rates will not stay at multi-decade lows any longer. That’s why it’s crucial to act today, whether you want to refinance and lower your mortgage payments or are ready to pull the trigger to buy a new home.
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