This year several clients are looking to buy real estate and have asked us whether they should buy in this housing market or postpone. Mortgage rates are at record-lows and shortage of inventory in relation to buyer demand are driving up prices. The combination of a strengthening economy, millennials nearing their peak homebuying years, low mortgage rates, plus the increase in work-from-home as a result of the pandemic have fueled demand.
It is a sellers’ market: Some buyers are making offers without seeing the property! Bidding wars and offers over listing price are normal; 89% of houses sold in June were on the market for an average of 17 days compared to an average of 24 days in May.
The median national home price for June 2021 was $385,000, a 12,7% increase from June 2020. This is coming down from April this year which saw a 17.2% increase year over year. The majority of homebuyers are in the upper end of the market and making it harder for first time home buyers. Some buyers want to postpone their real estate purchase till the market comes down. However, due to the persistent shortage of housing and the rising cost of building materials, some experts predict that the median home price for the country could easily rise by 10% cumulatively over the next two years.
A market solution would be to build more units. The lack of construction for the last decade, and especially over the last five years when a lack of inventory has become a major issue, appears to be a significant, if not the primary driver of house price appreciation. The hard part is that the US is short A LOT of housing units; it would need to construct nearly 50% more units each year over the next five years to catch up. That would be a boom!
How to go about it
If you want to buy Real Estate now, the same recommendations as other years apply: PREPARE!
- Envision: What are the important characteristics of the new home: location, commute, how will you live, sleep, enjoy time with friends and family? Walk to town, grocery store, kids school. Maintenance, renovation?
- Make a Financial Plan: How much can you afford?
- What amount do you have available as down payment?
- Monthly budget change for your new house: Estimated all costs, beside mortgage, utilities and insurance also commuting costs, maintenance.
- What are the one-time costs like moving, furniture and renovations?
- Talk to your bank or a mortgage broker about how much mortgage you can get and what rate they offer
- Be prepared, so that when you see a property you like, you can react quickly. And keep to your budget: if you don’t get this house, there will always be another (maybe even better) one.
Anja & Clare
