#2 Real Estate Trend 2023: Average Home Prices Show No Signs of Slowing Down
For most people, buying a home is one of the heftiest investments they make in their lives. It involves saving up for years to afford the house or/and securing funding from various financing sources. Today, this process is more challenging than ever, thanks to home prices hitting record highs.
The average price of a house has dramatically increased over the last few decades. If we track down the prices right from the first U.S. housing census, the average price of a single-family home was around $30,600 in 1940. As of January 2021, the average price of a single-family home stands at $346,000.
Real estate experts thought the COVID-19 pandemic would slow down the increasing home prices. However, what happened was the opposite. According to the reports of the June 2022 Monthly Housing Market Trends Report, the national median home price for active listings was $416,000 in November 2022. It is an 11% increase in comparison to November 2021. However, the silver lining is that the growth rate has slowed down compared to the average of 16% seen in June and July. It suggests that the rate at which house prices have been rising will calm down a bit in 2023.
However, as we discussed in our previous blog, there is a shortage of homes for sale, and the buyer demand is only increasing. So do not expect home prices to decrease significantly.
In this blog, let’s get further into the conversation of increasing home prices and their impacts on the real estate market.
The Impact of High Housing Prices on the Real Estate Market
How Do High Housing Prices Impact Real Estate Buyers?
If you’re a buyer in a high housing price market, investing in a house will be expensive. Therefore, you need to be careful about the factors that can affect your buying affordability.
Create a budget and stick to it. A lot of buyers succumb to the pressure of seeing their competitors plucking good homes off the market. However, remember that you set a budget for yourself for a reason. If you get swayed and decide to invest in a home that’s out of your budget, it’ll be a headache for you later. You’d either end up extracting a larger sum out of your savings than you expected or get stuck with a mortgage payment you can’t afford.
However, it’s not all bad. There is a silver lining for you too. If you’re opting for financing options in a high housing price market, you have an incentive for the mortgage. The market offers low-interest rates that make securing a mortgage seem like an attractive investment.
Regardless, pay attention to your finances and your house needs, and make a decision accordingly.
Here are a few tips on what you can do as a buyer in a high housing market to ensure you make a profitable deal –
- Don’t spend more than 25% of your take-home pay on your house payment.
- If possible, make a big down payment in advance.
- Consider a conventional mortgage with a 15-year fixed rate.
How Do High Housing Prices Impact Real Estate Sellers?
If you’re a seller in a high housing price market, congratulations! It’s a good time for you to be a seller. High housing prices mean you’ll earn a hefty profit on your deal.
In a real estate market where the house prices are high and the inventory is low, sellers are on a profitable horizon. In such situations, you are most likely to be excited and offer your deal to the buyer offering the highest bid. However, don’t make decisions just based on prices.
There will always be someone with a better bid, but your focus should be on getting the ideal deal. By ideal, we mean a buyer that not only offers your profit but also peace of mind. If you have several same-range offers, go beyond the price and assess buyers. You can work with a professional real estate agent who will go through all the hassle for you to find the perfect buyer. Also, with multiple similar offers, you can say no to outlandish buyer demands. Remember, you have the upper hand in the market, so leverage it to cut a highly-profitable and convenient deal.
The real estate agent will also help you make the right decision on when to sell and when to wait. Buyers will always try to cut a deal that’s profitable for them. In such a negotiation, you may end up selling your home at a profit lower than your property can make.
The high housing price market is a mixed field for both buyers and sellers. If you want to take advantage of your situation, keep an eye on the market and monitor what’s happening in your neighborhood. The best way to deal with it is to hire a real estate agent who can help you navigate through the market challenges and shake hands to a perfect deal.
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