Thinking of Buying a New Home? It May Be Harder Than You Think
There’s good news for home sellers. The number of days houses are staying on the market at the moment is lower than it’s been in years, so you’ll have little trouble putting yours on the market. Unfortunately, this is bad news for buyers. Since homes are staying on the market for less time, it’s making it much more difficult for the average house hunter to find one that meets their needs. Furthermore, when you do find one, it may cost more than you’re prepared to spend.
Higher Mortgages, Lower Inventories
For several years now, the number of houses on the market has been low. Ever since the housing crash of 2008, people have been reluctant to put their homes up for sale. Afraid they’ll end up losing money, they hang on to their property instead. This makes it more difficult (and more expensive) for first time home buyers to enter the market.
Experts had predicted that this year, things would ease up a bit, and inventory would increase. Unfortunately, it seems that the opposite has happened, and there are now fewer houses than ever up for sale.
Another problem is rising mortgages. Between 2009 and 2015, mortgages were lower than they’d been in decades, as the Fed was keeping the interest rate near zero. A lot of people took the opportunity to refinance their homes and lock in a lower rate than they were paying before.
But now, the interest rate is going up again, and so are mortgages. So anyone who managed to lock in a lower rate a few years ago would be reluctant to sell now, as purchasing a new home would cost them more.
Rising Home Prices
Additionally, the lower inventory is pushing prices higher. The market hit its lowest point in 2012, but since then, prices have increased by 55%. In fact, last year, they were higher than they’ve ever been.
So from a current homeowner’s perspective: a new home would cost more and have a higher mortgage than their current home. This would put them into significantly more debt than they currently have. That in turn makes them even more reluctant to sell, pushing the inventory down even further, and creating a vicious circle.
What to Do
So what should a first-time homebuyer do under these circumstances? Their first step should be to rethink whether they actually want to buy a new home now or not. It might behoove them to wait until there’s more inventory available, and the market favors buyers a little better.
But maybe you can’t wait. Maybe circumstances have forced you to need a new home in the immediate future. First, be prepared to spend more than you’d like. Increase your maximum price by at least a couple of hundred thousand dollars. It may also be beneficial to expand the area in which you’re looking and be willing sacrifice features that you’d like but don’t necessarily need right now, like a swimming pool, a big backyard, or a guest room, in order to expand your options. Finally, just be vigilant. Look at listings online and in the local paper. Look for open houses. Talk to real estate agents and see what’s available and what they might be able to do for you.
Buying a new home is going to be difficult, at least for the next few months. There’s no telling how long the lack of inventory and high prices will continue, but hopefully they’ll get better soon. Higher mortgage rates appear to be sticking around for a while, but that’s just one of the hazards of home buying. With a little luck and a lot of persistence, you’ll be able to find what you need.