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You Should Probably Wait to Buy a Home

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Should I try to buy a house now? Asking real estate agents, economists, and potential homebuyers these days can elicit something between whining and screaming. It never seems like the best time to say, “You’re committing to pay this huge mortgage over a very long period of time.” is “particularly scary,” she said. Many Americans seem to share this sentiment. Her July home sales numbers were half those of the same month. Two years ago.

Several structural and some cyclical factors have combined to make the current housing market one of the most challenging, expensive and stressful in recent years. While some lucky Americans are poised to score some deals, many other families are negotiating the process by lowering expectations or increasing budgets.Redfin’s Chief Economist Daryl Fairweather said, “There are always people out there who say now is the right time. There are people looking to move across the country in search of new job opportunities. They’ve been laid off and are rethinking their finances.” There are people in need.”

However, the housing experts I spoke to agreed that many families want to consider waiting if possible, and here are five reasons why.

AMAZING PRICE. House prices are very high right now. There are not enough units available in the desired metropolitan area. Decades of UnderbuildingOver the past two years, a shortage of supply has met a surge in demand as older millennials seek to settle in and work-from-home policies have allowed many families to relocate. Until a few months ago, such homebuyers benefited from mortgage rates that were half or less than their own. past average“The housing market was on fire until this spring,” Fairweather said. I’ve heard so many stories. Escalation clause” is to avoid being overpriced.

As a result, the national median Selling price The average price in the San Francisco, San Jose, Anaheim, and Honolulu metropolitan areas rose to $455,000 $1 million breakthroughAccording to Case-Shiller indexsingle-family homes are 65% more expensive than they were before the housing bubble burst in 2007.

Soaring mortgage costs. Price tags for apartments and homes across the country remain at or near historic highs.and the cost is finance Those apartments and houses are rising sharply. To keep the country’s runaway inflation rate down, the Federal Reserve has raised borrowing costs.of average rate Interest rates on 30-year fixed mortgages have soared from less than 3% two years ago to nearly 7% today.

For a family that bought a $400,000 home at a 20% discount, monthly mortgage payments jumped from about $1,600 to $2,400. Total interest on the cost of the loan increased from $154,000 to $424,000. A family where two years ago he could buy a $500,000 house at an interest rate of 3.2%, today he can buy a $340,000 house at an interest rate of 6.7%.

Low in stock. Why didn’t the unusual surge in borrowing costs lead to lower prices? “The list is down 20% from last year,” Fairweather said. “If you already own a home and have it fixed at a low interest rate, there is no reason to sell it right now.

Less inventory doesn’t just mean higher costs for potential buyers. It also means people have less choice because they have to do more searching and wait to find a home that matches their criteria.

stock market decline. House prices may not have adjusted significantly, but the stock market has: especially be hit.Considering many people are selling stocks to buy a house, especially if they are in the market jumbo mortgagethe fall in stock prices has made buying a home even more expensive and an unattractive proposition.

infinitely uncertain. Federal Reserve risks recession to keep inflation in check: Economists surveyed by Bloomberg see contraction likely next year 60 percentThe Conference Board, a business think tank, puts probability into 96 percent.

Even if the economy does not shrink, slow down Slower growth means more layoffs, slower wage growth, lower consumer spending and less business investment. It is not an environment where many people can buy a house with peace of mind. Who wants to put down an $80,000 down payment just to lose his job, or who wants to be tied up with a $2,000 monthly mortgage payment if he has to move to a lower-cost area soon?

The risk of recession isn’t the only cause of bad moods. For example, mortgage interest rates are most unstable They’ve been around for 30 years. Realtor.com’s Hale said: “This makes it harder for buyers to know how much they can afford to pay, and harder for sellers to know how to price their homes. People are just holding hands.”

Given all these pressures, is there anyone this could be a problem good time to buy? Sure, a housing expert told me. Today’s situation is great for people in financial situations who pay cash or pay a very large down payment. It’s also acceptable for families looking for an expensive area with falling prices. San Francisco, and for the wealthy who want to avoid bidding wars in places like Manhattan. “If you can still afford it, I’d say this guy is in the best shape he’s been in two years,” said Zillow economist Orphe Divounguy.

Homebuyers who don’t fit into these lucky categories may choose a less desirable home. You might choose a house that is smaller or needs more repairs, or a house far away in the suburbs. You might also choose to increase your monthly budget or put in more money if possible. Some families take variable rate loans or bet on future refinancing. “There was a percentage point gap between fixed and floating rates,” Hale told me. “Converted to today’s median list price, that’s a $225 lower monthly payment — enough to make the difference between buying or not.”

However, because a variable rate loan has a variable rate, the family will end up paying more, creating some form of budget volatility. Also, refinancing is expensive and may not be a useful option if interest rates remain high. “There’s a saying, marry the price, but date the rate,” Fairweather said. , which is what the more risk-tolerant people are doing.”

Those who have to enter the housing market can console themselves in modest ways. Even with less economic uncertainty, lower mortgage rates and more listings on the market, no one believes it’s unlikely that American real estate will become significantly more affordable. . In the medium to long term, it is because of the huge underlying housing shortage. “If you’re going to be in the house for seven or 10 years, delaying that purchase may not be the brightest idea,” Divounguy told me. , the upward pressure on prices will continue.”

Today may not be the best time to buy a home. Tomorrow may not be the case either.

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