• April 21, 2024

Is now a good time to buy — or sell — a home? Here’s what Americans need to know about the hot real-estate market

With every purchase, people want to know if they are getting a good deal. But when it comes to buying a home in today’s market, that question is difficult to answer.

Americans focus on the state of the property market as the country enters the high season of spring home buying. Search trend data from Google
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shows that people are researching whether this is a good time to buy or sell a home.

Some of these people may be trying to make up for lost time. Around this time last year, real estate transactions slowed significantly as COVID-19 restrictions on businesses prevented home sales from continuing in many states. But home buying came back with a vengeance as the typical spring tide of home sales spilled into summer – and fall and winter.

In truth, activity in the property market has not slowed significantly since that initial slowdown at the start of the pandemic. The pandemic has fast forwarded the clock for many families who flock to see houses in suburban areas to get more space for their growing households. Additionally, many people want to leverage their newfound ability to work remotely and move further from the dense urban cores across the country to more rural areas where they can now save money as they no longer have to worry about long journeys .

What does this all mean for people who are about to buy or sell a house? This is what real estate and finance experts say:

Yes, it’s a seller’s market – but it’s more complicated than you think

House prices have skyrocketed during the pandemic and are not expected to fall anytime soon. In January 2021, house prices rose a staggering 11.2%, according to S&P CoreLogic Case-Shiller’s national property price index. Property prices are growing at the fastest pace since the Great Recession.

Why are property prices rising so quickly? The demand for homes is high, but not many are currently available for sale. Years of substructure have resulted in the country facing a serious housing shortage. Rising demand and dwindling supply are a perfect recipe for higher prices.

This is good news for those who can sell their homes now. However, for most sellers there is only one problem: they still need an apartment. “You will be among all of the other buyers competing for the small number of homes,” said Elizabeth Renter, data analyst at NerdWallet.

During the pandemic, people who already own homes were reluctant to put their properties up for sale. To some extent, this reflects the health risks associated with COVID-19 – and certainly many people were concerned about exposing their families to the virus through screenings.

“You will be out there among all the other buyers competing for the small number of homes.”

– Elizabeth Renter, data analyst at NerdWallet

However, the scarcity of homes for sale has become a vicious circle preventing sellers from listing their homes and therefore keeping inventory low.

Anyone who has to sell should remember that the ball is in its place. Due to the strong competition in the market, buyers are willing to make many concessions to make their offer more attractive. Savvy sellers can take advantage of this by asking to postpone the deadline so that it coincides well with their next home purchase, the renter said.

“If it weren’t for such a strong sellers’ market, buyers might not find it attractive,” she said. “Buyers know, however, that sellers have a list of buyers in a row. If that doesn’t work, the seller will likely find someone to buy their home.”

MarketWatch helps you find your way around the real estate market not defined Do you have a question about buying or selling a home? Do you want to know where your next step should be? Email Jacob Passy at [email protected].

Sellers shouldn’t rely too heavily on the timing of the market

Of course, higher prices attract some sellers to the market. A recent survey by NerdWallet and The Harris Poll found that roughly one in six homeowners plans to sell their home in the next 18 months. 45% of these respondents said that rising house prices and falling inventories caused them to sell earlier than originally planned.

But homeowners should be careful trying to play the market, financial experts warned. “Timing the real estate market is almost as difficult as timing the stock market,” said Rick Brooks, co-owner of Blankinship & Foster, a Solana Beach, Calif. Wealth advisory firm.

“And the transaction costs are much higher,” said Brooks.

Some homeowners started asking whether it is worth listing their homes now to secure a high price and then renting them until they find their next residence. But that’s a risky move. As Brooks argues, it is “almost impossible” to reasonably compare the cost of renting a home with that of owning a home because the two markets “don’t always move together”.

Buyers need to be prepared – in several ways

As wisdom goes in real estate, the best time to buy a home is if you have to because your life has changed. Many people choose to become a homeowner after they get married or when they have children in order to have more control over their housing costs while building wealth.

That said, many people don’t have the luxury of waiting to buy. And again, timing the market can be a breeze.

At the same time, it’s easy to get caught up in the emotions of securing your dream home in the middle of a bidding war.

“Be really firm on your home budget.”

– Danielle Hale, Chief Economist at Realtor.com

To begin with, buyers should examine how trends in their local market compare to national trends, said Danielle Hale, chief economist at Realtor.com. Find out which homes were recently sold on your neck of the forest and learn more about them. How long have they been on the market? How much inquiries did the sale cost? Did buyers have to do major renovations afterward? These details give buyers an idea of ​​how competitive their local market is.

Then they have to take on the difficult task of setting a strict budget. “Be really firm on your home budget,” said Hale. “I know this is likely to be a challenge for many buyers in an environment where house prices are rising very quickly.”

Determine how much you can afford to spend on your mortgage, insurance, and home maintenance each month. Use this to help determine how much you can afford. And then – here’s the hard part – avoid looking for homes on the higher end of that budget. Homes in many markets are sold well beyond demand, and if emotions get in the way, a buyer could face financial difficulties.

Make the largest deposit possible

A lot of Americans seem to be concerned about that Possibility of an apartment crash. Google is looking for terms like “When is the real estate market going to collapse?” Which is up more than 2,000% in the last month. “When we see prices rise as fast as we do, it might bring back memories of the last time for some,” said Matthew Speakman, an economist at Zillow
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said MarketWatch.

Real estate experts agree that while the market can cool down a bit – especially if mortgage rates rise – the chances of the market experiencing a downturn as it did during the Great Recession are slim.

Buyers can protect themselves and their investments in today’s market. The key is a larger deposit. “While low interest rates encourage prospective homeowners to buy as much home as they can afford and cut a very small amount, I strongly recommend customers put at least 10% on their home,” said Liz Gillette, financial advisor at MainStreet planning.

It takes an average of 11 years to create a 5% deposit, according to a new report

In the early years of home ownership, buyers build little equity because more of their mortgage payments are used to pay off interest rather than the principal of the loan. So let’s say a home buyer bets 3% on a home at 3.2% but has to sell – because, as Gillette warns, “life has a way of throwing us curveballs.” At this point you would have built up around 9% equity, but could spend up to 7% selling the home.

“You have very little time to fund your next down payment,” said Gillette. And that doesn’t even explain the prospect of property dropping in value. A larger deposit provides a buffer against these possibilities.

Saving a larger deposit is of course not easy. A new report The Center for Responsible Lending found that it takes the typical worker 11 years to save a 5% down payment on the house at average price. It’s even harder for black households, who can spend an average of 14 years building such a large down payment.

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