My clients have been contacting me to inquire as to where housing prices may be headed and question their current homes that they have lived in for more than five years.I encourage those who are looking to buy or sell within the next year to allow me to do a market analysis as soon as possible while we are still in a Seller’s market.
A homeowner who purchases and closes on a $250,000 home will acquire equity over a five-year period of over $43,000. This figure does not even take into account their monthly principal mortgage payments. In many cases, home equity is one of the largest portions of a family’s overall net worth. For those families who have no college payment plan in place, the equity may be borrowed against for those types of emergencies.
For most, this equity is used for the next home investment. Homeownership is still the safest place to keep your money – especially in light of the volatility of the stock market and world politics and economies.
According to the National Association of Realtors (NAR), the supply of homes for sale dramatically increases every spring. As an example, here is what happened to housing inventory at the beginning of 2016. Buyers in the market during the winter months are truly motivated purchasers. They want to buy now. With limited inventory currently available in most markets, sellers are in a great position to negotiate.
In our area, buyers want to take advantage of the summer months to get settled, enjoy their new pools and get their children registered for school. Currently, our lack of inventory drives up the prices; however, experts predict the housing market may soon favor buyers.
The median home value in the U.S. is now $191,200, up 6.2 percent since last October, according to Zillow’s October Real Estate Market Report.
- Home values rose 6.2 percent over the past year to a Zillow Home Value Index (ZHVI) of $191,200 in October.
- Rents rose 1.4 percent over the past year to a Zillow Rent Index (ZRI) of $1,402.
- There are 6 percent fewer homes for sale than a year ago.
Within two years, most experts surveyed predict the housing market will shift from the current seller’s market to a buyer’s market.
However, home values will appreciate by 4.0% over the course of 2017, 3.2% in 2018 and 3.0% the next three years. That means the average annual appreciation will be 3.24% over the next 5 years.
As home value appreciate, interest rates will increase. Once you sell your home, you will be investing in your new home because renting does not make sense.
Your monthly housing cost is directly tied to the price of the home you will purchase and the interest rate you secure for your mortgage.
Over the last 30 years, interest rates have fluctuated greatly with rates in the double digits in the 1980s, all the way down to the near 4%.
I am encouraging my clients to act now before rates go up so greatly that it affects their buying power.