Over the past two years, home prices have grown at rapid speeds, leading to the record-high prices we see in today’s market. According to realtor.com reports, the median home sale price in Macon, GA rose from $134,000 in January of 2020 to $185,000 in January of 2022 – a 38% increase. One of the key factors causing this price inflation is low inventory. The recent pandemic brought about labor shortage, material delays, and supply chain issues, which led to a severe lack of new construction. Low housing supply coupled with high housing demand has led to intense competition among buyers.
Many people are calling this competitive market a “housing bubble”, even though most experts are confident that there will not be another housing crash anytime soon. Still, some buyers are concerned about purchasing a home during a market with such high inflation. Some buyers may even be waiting for a shift in the market. However, despite home prices and interest rates steadily rising, the housing market has remained strong. Prices are still expected to rise, although at a slower pace than previous months. So, what is the best move for you?
If you are searching for your very first home, you are probably facing one of the biggest disadvantages in the market: a lack of cash. Other home buyers may have built up equity or gained a profit from their previous home, which gives them much more flexibility to compete in the market. In fact, many homes are selling for more than the asking price with little to no contingencies. If you are consistently getting rejected on houses you love, it may be tempting to empty all your savings and skip out on inspections to make your offers more appealing. However, there is a better solution.
New construction communities are typically first-come, first-serve in their early stages. This eliminates fierce competition from cash buyers and bidding wars. Buying a brand new home also reduces the costs of repairing and refurbishing a previously lived-in home. Additionally, new homes often come with warranties to cover any issues within the first year of living in your home. Talk to your real estate agent about local, reputable builders, and explore the various floor plans they are offering. Even if your first home is not your dream home, you will build some equity in your home over time, and you can re-enter the market with a higher competitive advantage.
With the advantage of extra cash and flexibility, property investors have a major advantage in the current market. However, depending on the type of investment you are seeking, fluctuations in the market could be more impactful. For example, if the housing market were to flip next year and prices fall dramatically, short-term investors may find themselves facing a loss. On the other hand, investors who plan to rent out their properties will likely benefit from long-term price appreciation while enjoying a steady income from their renters.
Homeowners may think that putting their house up for sale in a seller’s market is an easy decision. However, once you sell your home, you will be entering the market on the other side, as a buyer. In some circumstances, like a job change or a growing family, moving may be the only option. If you are just hoping for a change of scenery, it is important to consider the pros and cons of selling your home.
First, talk to your local real estate agent about what your home is worth, and what you might reasonably expect to gain from the sale. Remember to subtract any amounts you still owe on your current mortgage. If this isn’t enough to buy your next home with cash, you may have to take out a new loan. Ask a local lender to help you calculate a new budget based on your income, assets, and the current interest rates.
Once you have decided if moving is a good financial decision, consider the timing of your transition. If you start making offers on properties before you have sold your own home, you may end up with two mortgages. You may be able to write an offer with a contingency on selling your home, but this will significantly weaken your offer. Another option is to sell your home to a buyer who agrees to rent it back to you until you can find your next home. Ask your agent to help you choose the best course of action.
Your Best Move
Wherever you are in your homeownership journey, it is important to take the market into consideration before you make your next move. First-time home buyers are likely having the most frustrating experience in the current market, but it does not mean that now is a bad time to buy. In fact, with prices and interest rates still on the rise, it may be beneficial to purchase a home in the near future and build equity over the long run.
Investors are reaping the benefits of large profits, whether from house flipping or rental properties. However, in an inflated market, short-term investment is a particularly risky move that should be carefully evaluated. If you have any properties that you would like to release from your portfolio, now is a great time to sell.
For current homeowners considering a change, the smartest move is to ask your local real estate professionals for help and guidance. Every situation is unique, and the best choice for your neighbor may not be the best choice for you.
In order to make the most out of this unprecedented market, consider your goals, review your finances, and consult a real estate agent about how those fit within the market. Our agents here at Sheridan Solomon & Associates know the ins and outs of this market and how it changes from day to day. We are always willing to help you accomplish your real estate goals. Visit our website at sheridansolomon.com to contact us or learn more!