4 Out of 5 Americans Think This is a Mistake. Are You One of Them?
KEY POINTS
- Homes today are limited and overpriced.
- As such, many people agree that it's a really bad time to buy.
No one would blame you if you agree.
If homeownership is a goal of yours, you may want to put it on hold -- at least for the rest of the year, and possibly well into 2023. Right now, housing market conditions are extremely tough, so much so that according to Fannie Mae's most recent Home Purchase Sentiment Index, 79% of respondents think buying a home now is a mistake. And here's why they may be right.
Housing inventory is extremely limited
There's been a glaring shortage of available homes to purchase since late 2020. That's created a housing market that's tough to crack.
Low inventory means it's harder to find a home that meets your needs and fits within your budget. It also means that when decent, reasonably priced homes do hit the market, there's apt to be a battle for them in the form of a bidding war. Those can be stressful and leave you paying much more for a home -- that is, if you manage to win.
Home prices are sky-high
When you have a situation where demand exceeds supply, the price of the item in question is likely to rise. Such is the case with today's housing market.
Because there's such a major shortage of homes to buy, housing prices have risen at a rapid clip and don't appear to be dropping to more moderate levels anytime soon. And so if you buy a home today, you might bust your budget and overpay -- a lot.
Mortgage rates are high -- and they could keep climbing
Mortgage rates have risen at a rapid clip since the start of 2022. And there's reason to believe they can still go higher.
The Federal Reserve is in the process of implementing interest rate hikes in an effort to slow down inflation. As a result, consumers should expect higher borrowing rates across a range of categories, from mortgages to auto loans to credit cards.
In fact, according to the aforementioned survey, 70% of Americans expect mortgage rates to keep climbing in the near term. And that, combined with the factors above, makes now a bad time to buy a home.
Should you delay your homeownership plans?
It may be that you've been saving for a home down payment for many years, and you're financially ready to own. You might also have a great credit score -- one that will likely result in the most competitive mortgage rates lenders are offering up.
That's all fine and good. But unfortunately, being a strong buying candidate does not make today's real estate market a good one to participate in. And so it could work to your benefit to delay your homeownership plans a bit longer.
We can't say with any sort of certainty that housing inventory will pick up later this year or early next. But in time, real estate listings are apt to increase. And once that happens, it should narrow the gap between supply and demand so that home prices start to drop.
Of course, if you're in a really bad housing situation -- say, your landlord keeps imposing outrageous rent increases and/or renting has become unaffordable where you live -- then you may want to move forward with home-buying plans. But otherwise, it could pay to follow the advice of the 79% of Americans who agree that it's just not the right time to be buying a home.
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