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The combination of higher home prices and mortgage rates is making life difficult for buyers. Read on to learn how to navigate today’s real estate market.
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Home buyers have been struggling with low housing inventory for a long time now. But while that’s a big enough challenge itself, buyers today are also being forced to grapple with sky-high mortgage rates and home prices.
In July, the median existing home sale price rose to $406,700 after five months of declines, according to the National Association of Realtors (NAR). But given where borrowing rates are at, buyers today are looking at potentially expensive mortgages — even if they don’t stretch their budgets to complete a home purchase.
Why are home prices rising?
Home prices typically rise when buyer demand is strong. Given that mortgage lenders are charging such high rates these days, you’d think buyers would be backing out of the market. But the reason home prices have managed to rise largely boils down to a lack of real estate inventory.
As of the end of July, there was only a 3.3-month supply of available homes on the market, says the NAR. That’s a welcome 3.7% increase from a month prior. But it’s also well below the 4- to 6-month supply that’s typically needed to fully meet buyer demand.
Also, buyers might finally be coming to terms with today’s mortgage rates and aren’t getting spooked by them. When borrowing rates first started to soar in 2022, it came as a shock to many buyers, especially on the heels of 2020 and 2021’s record-low mortgage rates. But at this point, mortgage rates have been elevated for more than a year, so perhaps buyers are learning to accept today’s costs.
How to navigate today’s housing market
Between higher home prices and mortgage rates, it’s clearly not an easy time to buy a home. But one thing you may want to do if you’re hoping to buy in the near term is reset some expectations.
At a time when inventory is low and home prices are up, being too choosy could work against you. So you may want to shorten your wish list and focus on the features that are really important to you.
You might want an updated kitchen. But if you need three bedrooms due to the size of your family, then that should take priority on your list. And so if you come across a home that has enough square footage to fit your family but needs updating, don’t write it off immediately just because it doesn’t have everything you want.
In fact, a good bet could be to try to find yourself a starter home — one that’s perhaps on the smaller side and needs some work. You may find that a starter home is far more affordable than a larger, more updated property, and that your ongoing ownership costs are more manageable as well.
Of course, one challenge you might encounter is that investors are scooping up starter homes in short order, so there aren’t that many on the market. But if you manage to come across one, consider it a good opportunity.
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