If you follow the news at all you are aware of the current state of the U.S. housing market. It is not ideal to say the least as we’ve been encountering a very unique market overall. After Covid-19 many speculated that we could see a repeat of the 2008 housing bubble crash. However, our current situation is unprecedented and has many people asking is it too late to buy?
Covid-19 Impact
First, we will get some context into how we’ve gotten to this point. During the Covid-19 epidemic the housing market was drastically affected because of the global lockdown. Home prices in many areas began to soar in price during this period. The reason for this was due to the shortage of housing inventory available. There was supply chain shortages and uncertainty of the overall economy. This led to less builders doing new constructions because of lack of materials and increased building costs. This created a significant impact to the housing market because pre-covid new builds accounted for over 13% of the total for-sale inventory.
Data collected from the National Association of Realtors shows the median home price in the U.S. shot up remarkably since Covid. The median price for an existing home in March 2020 was just $280,700, a figure that seems high but is actually quaint compared to July 2023’s $406,700.
Having increased home prices is one thing, however, combining that with the highest interest rates in nearly 20 years is what has many people worried. Many would be buyers are currently sitting on the sidelines expecting a crash to occur at some point. Leading people to believe that buying right now is a bad investment and that you’re better off renting. I would agree with this statement if rental prices were not increasing as well. You must remember as housing prices increase so does the rent. According to a report by Realtor.com, the median asking rent in the 50 largest metros was $1,747 in September 2023. CNBC also reported that year-over-year rental price growth rose from 5.8% in June 2022, to 8.4% in May 2023. This drastic growth in rental prices doesn’t make renting a viable option either, especially depending on your location. Making the decision that much harder for people to navigate.
Buying Now Still Makes Sense
Like many of you I originally was a part of this group who was unsure of what to do. I believed that maybe I should look to just rent or wait until a correction in the market occurred and then jump in. During the home searching process that sentiment quickly faded as month after month things seemingly got worse and worse.
Through talking to my relator and other professionals in the space I realized that it actually is not too late to buy. I opted to purchase my first property in February of 2023. I was able to lock in at a 6.25% interest rate. At the time I was second guessing my decision however, seeing that not a year later interest rates are almost at 8% I realized I made the right decision.
Current buyers and those on the fence you need to remember the old adage “the best time to buy a house was 20 years ago, and the second-best time is now”. If you find a home you love and can afford then don’t let the current interest rates scare you off. By buying now you know your interest rate can’t get any higher. You also obtained the home that you wanted and acquired an asset that can benefit your future.
Another factor to keep in mind is the barrier to getting a new home. With the increased home pricing many think the down payment and closing costs are too expensive when in reality it is not as expensive as you’re led to believe. The FHA, Fannie Mae and Freddie Mac are aware of the challenges in the housing market currently. Which is why they have created many new programs and assistance grants to help families get into new homes. So, I encourage you to look through their websites and work with your agent and loan officer to see what you qualify for. Also keep in mind that just because your interest rates are high now does not mean you have to keep them forever. There are many refinance options available to you after purchasing your home. Talk with your loan officer to learn how and when take advantage of lower rates which can drastically lower your monthly mortgage obligation.
Now armed with some new knowledge really take a look at the current market. Decide if you really want to buy, and if the answer is yes then congratulations you realized it’s not too late!