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There’s a reason so many buyers struggled to make a home purchase in 2022. Not only were home values still sky-high, but mortgage rates rose sharply last year, adding another complication on the affordability front.
These days, mortgage rates are still high, though they’ve come down a bit compared to where they sat during the latter part of 2022. And home values have come down, too. Data firm Black Knight reports that home values have fallen 5.3% since June. And based on that information alone, you may be thinking it’s time to go out and buy a home.
But while home prices may be down compared to June, they’re far from affordable. And between that and today’s mortgage rates, you may find that purchasing a home isn’t so feasible just yet.
Home prices are still up
U.S. home prices may be down 5.3% since June, but they’re still up 5% from a year ago. Meanwhile, mortgage rates are considerably higher now than they were back in February 2022.
In February 2022, mortgage borrowers in search of a 30-year fixed loan were looking at an average interest rate in the mid-3% range. Nowadays, that same loan product is still averaging above 6%. So all told, it wouldn’t exactly be accurate to call today’s homes affordable.
Low inventory could be an issue, too
As of late December 2022, there was only a 2.9-month supply of homes for sale on the market, according to the National Association of Realtors. It can normally take up to a six-month supply of homes for there to be enough inventory to meet buyer demand.
If you seek to buy a home right now, you might struggle not only due to higher prices and mortgage rates, but also due to a lack of choices. And while it’s not a bad thing to be willing to compromise on certain home features, when you’re talking about the place you might be living in for the next five, 10, or 20 years, there’s only so much compromising you should be willing to do.
It’s one thing to buy a home with an outdated kitchen that you can fix up down the line. But if you have a large family and you buy a 1,200-square-foot home on a tiny lot, you won’t be able to turn it into the 2,000 square feet of space you actually need.
Plus, even if you’re willing to take on certain home renovations if it means getting to buy a place of your own sooner, remember that between higher home prices and mortgage rates, you may not have enough room in your home-buying budget to fix up your home for quite some time. And just as mortgage rates have gotten expensive, so too have personal loan and home equity loan rates. So renovating your home to meet your needs may not be as easy as you’d expect.
All told, it’s still a difficult time to be buying a home, despite a notable dip in prices. This isn’t to say you won’t have success if you decide to move forward with a home purchase. But don’t be surprised if you run into issues with affordability or a lack of inventory.
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Story Credit: usatoday.com