Record-low interest rates over the past two years have lured many Americans into thinking the Federal Reserve would always low-ball the cost of cash. But this has been an exceptional period, not the norm.
Today, our interest rate is still lower than at the beginning of 2019. And since then, the average value of residential real estate has risen by 35%.
If you’re a first-time buyer, you’re likely renting and wondering why you should continue to pour your equity into the landlord’s mortgage with increasingly higher rents.
Trying to time your move in the market is fraught with risk. There’s an almost endless supply of economic research warning against “timing the market”.
So, if you’re caught up, wondering where the market is heading, here are some points to help clarify the situation. I hope you find them helpful.
Time your move
You take a risk by trying to “time” your action in the current market. If you get it wrong, you’ll sell for less and buy for more. My best guidance is to make a move when you’re ready and not worry about factors beyond your control.
Supply
While supply of properties has increased by 18% in the past 12 months, it’s still more than 50% adrift of 2019’s figure, according to realtor.com. So, there are still more buyers than available homes to purchase.
Demand
Rents are rising by double-digit increments right now. In some areas of America, it’s cheaper to buy than rent. But here’s the thing: renters facing their own rising costs will enter the market in increasing numbers, and investors seeing high rents will do the same.
Local data
Research the prices being achieved in your neighborhood to find your truth. As an agent in your area, I can help you out. Don’t assume the national averages automatically reflect your situation.
Other factors
If you are a first-time buyer, you may gain tax advantages from maintaining a mortgage, so seek advice and factor this into your calculations.
Gallup poll
If you’re wondering what other folks think, a recent Gallup poll found our fellow Americans voted for the eighth year in a row that real estate was the best long-term investment. Left in the dust were stocks, bonds, gold and cryptocurrencies.