Is it the right time to buy or sell a home?
One of the largest expenses everyone faces in their budgets is housing. So with the current inflation rates on the rise, it is not surprising that the real estate market is significantly affected by this change in the economy. Inflation in the U.S. hit the highest rates in decades due to economic growth, workforce shortages, and a hampered supply chain.
Inflation is defined as a gradual increase in the price of goods and services in a given market. It is the loss of money’s purchasing power. Once the overall price level rises, currency is able to buy fewer products and services. In times of inflation, people tend to make less spending, saving, and investment decisions.
Inflation can impact real estate both negatively and positively, depending on the investment and the market. Let’s take a closer look at the relationship between inflation and real estate and then explore whether it is the right time to buy or sell a home in the current market.
Why do real estate prices rise during an inflation?
The rise in inflation rates causes money to be more expensive to borrow, so people don’t borrow as much of it, or they borrow nothing at all. The chain reaction is fewer mortgage-financed home purchases. This causes a lull in economic growth. Additionally, the cost of building a home increases during inflation. This is most commonly due to rising wages, more expensive materials and supplies, and land costs. This cost is passed on to home buyers and real estate investors. The National Association of Home Builders reports that overall building material prices have increased by over 19% in the last year. This includes items such as lumber, gypsum board, and ready-mix concrete.
What are the advantages to owning real estate during a period of inflation?
- Homeowners will see appreciation in their home investment as property values rise along with prices. According to a recent CoreLogic report, in the first quarter of 2022, U.S. homeowners gained $60,000 in home equity.
- As housing development slows, and the demand for existing properties rises, landlords raise rents. This generates higher revenues, and increases property values.
- High cost mortgage rates means that buyers have less purchasing power, so they continue to rent. This gives landlords the opportunity to export inflation to tenants. Owning a single family rental property may offer an investor the opportunity to pass the rising costs of inflation on to a tenant in the form of a higher monthly rent. Financing rates have not risen at the same rate as inflation, so property investors are seeing a significant return on their investment.
Is this a good time to sell a house?
With supply low and demand high, sellers can aim high for the asking prices, and can potentially receive offers above their asking price. In a Seller’s market, there are more interested buyers than available homes, making it difficult to buy a house. This puts Sellers at an advantage. Homes sell faster and buyers compete with each other in order to score a property. In this market, buyers are often willing to spend more than the asking price on a home. In a Seller’s market, bidding wars often arise, in which buyers make competing offers for a home.
Sellers must compete with each other to attract buyers in a Seller’s market. So it is important to keep your house clean and organized and in good condition. Price the home fairly and carefully consider any offers. Be sure to examine the financial strength of each potential buyer. The last thing you want to do is accept an offer that doesn’t go through, and then be forced to put your home back on the market.
Selling your home can be easy. Let the experienced staff at Boyle and Kahoe help you make it happen. Their team of local real estate experts are ready to help you sell your home. From setting the price to creating marketing campaigns for traditional media and Web, they have a proven plan that will match your home with the right buyers for the right price. They are committed to fast, professional, and courteous personal service to help you understand and feel at ease throughout the home selling process.
Is this a good time to buy a house?
Inflation will continue to favor home sellers and investors this year, but the hope is that, after 2022, the tides will turn in favor of homebuyers next year. However, owning a home means getting to build equity in a property. That could help you increase your net worth and give you more borrowing options should the need arise.
Buying a home is a very personal decision. Homes are the biggest purchase most individuals make in their lifetime, so it is crucial that, regardless of the state of the economy, a prospective home buyer is in a solid financial position. It is important to stick with your budget and avoid getting into a bidding war that makes you break your budget. The scarcity of houses available has driven people to make quick decisions, leading often into buyer’s remorse. Be patient and purchase a home within your budget that will provide you long term economic stability. You are in a strong position to buy a home if you have a steady job, a down payment saved up, a great credit score, and low levels of debt.
Imagine buying your dream home. Let the experienced staff at Boyle and Kahoe help make it happen. Their team of local experts is ready to guide you through the home-buying process. Their trained and licensed agents specialize in the Harford County area real estate market and are prepared to find the right home and get the best price.
If you are looking to sell a home or buy a home during this inflationary period, as with any big financial decision, it is important to keep your guard up for economic risks. Smart planning, time management, and advice from a reliable real estate brokerage, like Boyle and Kahoe, can help guide you through your home buying or selling journey. Boyle and Kahoe Real Estate was founded in April 2019 by Jessica Boyle Tsottles and Robert Kahoe.
The brokerage foundation is based on a strong passion for real estate and helping connect clients to the right properties. Jessica Boyle Tsottles is an experienced Realtor in Harford County, and Robert Kahoe is an experienced attorney focusing on real estate, estates and trusts. Together, the two are blending their vast knowledge bases together to start a brokerage that will be able to handle any real estate transaction. Both with local roots to Harford County for over 100 years, they are the area’s best experts! Check out their website at https://www.boyleandkahoe.com/ for more information.