The winds have turned on the US housing market. After months of weathering unimaginably high prices and endless bidding wars, weary buyers may find reprieve in the incremental price decline.
However, experts are warning buyers to beware: lower prices may not mean an easier ride.
House hunters should take heed of the current market, and before choosing to purchase, they should keep these considerations in mind:
Expect Higher Monthly Payments
Yes, prices are declining, but interest (and subsequent mortgage rates) are still high. Even though the house you may be considering could be cheaper than it was six months ago, your monthly payments may be higher.
To make an accurate budget for your next home, consider getting pre-approved with a mortgage lender, so you know just how much your expected rate is and what you qualify for.
Be Prepared To Wait
Due to the high rates and low inventory, you may have a hard time finding the home you originally envisioned in your new budget.
Not feeling rushed or pressured to purchase quickly will help you save money by spending wisely.
It will also help you stay sane as you shop.
Don’t Try To Time The Market
You’ve heard it once, and you’ll hear it again: the odds are against you when you try to time the real estate market.
Yes, prices are on their way down. Yes, they could continue on this downward trajectory for several months. Economists have predicted that they may stay low until 2024, but you’ll never be able to time the market to perfection.
If you have the budget and purchasing real estate is the right choice for you, then looking for the right home instead of the perfect time may be your best choice.
Play The Long-Game
Owning real estate is a long-term play. If you’re purchasing in the current market, you’ll benefit from living in that house (or holding on to that investment property) for a long time. The market is not well-equipped for short-term purchases at this time.
Not convinced this is a good investment? Homeowners in the US have a median net worth of 40x that of renters.
You are on the path to building wealth, and buying (and staying) will mean equity in your portfolio instead of money in a landlord’s pocket.
Have An Interim Plan
Some buyers in today’s market are in a position where they need to sell their current home to purchase another. Just as you have to be patient for the right home as a buyer, you may have to wait a while for any buyers to take you up on your current listing.
Buyers will negotiate in this market, which means you may not get what you want or need to complete your purchase on the other end.
You may also find that you aren’t able to get the closing dates you want on both ends of your purchase and sale. This could land you without a home for a short period of time between closings.
Make sure you plan for a scenario where you don’t get the cash or the dates needed from your sale.
Know Your Hidden Costs
Inflation hasn’t been on the headlines of every finance article for the last year for no reason. Prices are rising across the board – for everything. The costs you budgeted for things like utilities, services, inspections and repairs six months ago are likely no longer accurate.
Revise your budget to reflect the inflated hidden costs associated with buying a house, not just the mortgage.
Boost Your Credit Score
Mortgage rates have more than doubled since the beginning of 2022. According to Black Night, a mortgage data company, the monthly principal and interest payment on the median-priced home is up 73% from last year.
To lock in the best rate possible, work to improve your credit score. Higher scores allow you to qualify for lower rates, which means more savings on your monthly payments.
There are a few things you can do to improve your credit score today:
- Pay down debts
- Fix any errors on your credit report
- Request a higher credit limit
- Avoid late payments
Expand Your Search Radius
You may have your heart set on a particular neighborhood, but despite the slow decline, prices are still out of reach in a number of sought-after areas.
Consider expanding your search radius to include up-and-coming neighborhoods. Remember, real estate is a long-term investment. Setting down roots in an area that is benefiting from development now may have you reaping the benefits in the future.
If you’re willing to extend beyond nearby neighborhoods, why not consider one of the cities in the US that has experienced a more substantial price drop than the average? According to Zillow, month-over-month home prices dropped substantially in September in Phoenix (2.3%), Las Vegas (1.9%) and Austen (1%). Boise has seen tremendous change, with prices down 3.9% year-over-year in September.
The Bottom Line
Purchasing a home in today’s real estate market is challenging but not impossible. With prices on a steady decline and inflation data showing promising trends, buyers may be in luck. There is much to consider when thinking of opening your pocketbook, but buyers will be well-equipped to shop around in today’s housing market with these tips in mind.
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Disclosure: The author is not a licensed or registered investment adviser or broker/dealer. They are not providing you with individual investment advice. Please consult with a licensed investment professional before you invest your money.
This post was produced by and syndicated by Wealthy Living.
Featured image credit: Shutterstock
