4 Important facts you need to know about today's real estate market
Given the barrage of negative and concerning headlines about the economy, it's no wonder we're feeling uncertain and confused, especially when it comes to making a home-buying decision. But delaying your real estate plans based on macroeconomic issues may not be the wisest decision. Here are four facts to keep in mind when planning your next move:
1. Interest rates are still relatively low. While much of the news has been focused on the Fed's series of interest-rate hikes, which has sent mortgage rates soaring from 2% - 3% at the height of the pandemic to now between 6% - 7%, historically speaking, these rates are still considered low. The extremely low rates experienced in 2020 and 2021 were an anomaly triggered by the effort to sustain the economy during the COVID-19 crises. While no one is happy about the way rates are rising, they're still significantly lower than other periods in time, such as the 18% - 19% in the 1980s.
2. Home-price increases are letting up. While the headlines about housing affordability may be keeping your home-buying plans on hold, be aware that prices are beginning to tick down again. According to last week's report from the National Association of REALTORSⓇ, home prices just experienced their biggest drop since 2012. The median existing-home price for all housing types in April was $388,800, down 1.7% from April 2022. Certain cities across the U.S.—especially those that saw prices skyrocket during the pandemic—are seeing even more significant price drops.
3. Rents are rising. While rents are rising at a slower pace than they did in 2021, they are experiencing a faster rate of rise than they did prior to the pandemic. This is due in part to landlords trying to recoup losses they experienced during pandemic-related rent freezes and discounts. The national increase in rents makes buying a home as or more affordable than renting, even with higher interest rates, not to mention the long-term investment upside of buying a home. Renters need to calculate the cost of renting versus buying in their area before signing that next lease.
4. Local is all that matters. While national headlines can instill fear, the only facts that matter when it comes to real estate decisions are market trends and statistics in your specific area. Talk to a local real estate professional who can help you understand the local economy and make suggestions based on your personal financial situation. There may be a neighborhood with home prices that fall within your budget, for example, or a financing program you're eligible for. Until you get granular about your area's housing market and your individual financial picture, you won't know the real facts about the potential for buying a home.
Report was published on 5/26/2023