Should I buy a house now?
Let’s be honest, the housing market in the United States has been on fire for the past couple of years. Driven by pent-up demand, low-interest rates, and companies providing more flexibility on where their employees live due to the pandemic, homes are selling as soon as or even before they officially hit the market. As we start the spring buying season, you may be wondering if you should buy a house now. At HHHunt, want to keep you informed with industry information so you can make a decision that works best for you. Below, we’ve broken down key concepts to consider.
Interest Rates Will Rise in 2022
Federal Reserver officials announced that they would be raising interest rates on March 16. In fact, officials predict that interest rates could increase 3 or 4 times in 2022. Why does this matter? When interest rates rise, even by a quarter of a percent, that could add tens of thousands of dollars more to your mortgage. In fact, since the Federal Reserve’s announcement, mortgage rates have already started climbing to their highest levels in three years. Waiting to buy a new home could cost you money in the long term, so buying now makes smart financial sense.
There is No Housing Bubble
Many homebuyers are concerned that we are in a housing bubble similar to what we saw from 2004-2008. The simple truth is there is no housing bubble. However, we can trace the origins of the tight housing market back to the Great Recession. From 2007 to 2011, thousands of homebuilders went out of business. Couple that with the fact that those homebuilders that did survive stopped building new homes. Finally, so many homes were underwater on their mortgage and owners had to wait to sell to recoup their money.
For almost a decade, we had a stagnant home market. There has been pent-up demand fueled by millennials entering the homebuying market. In December 2021 there were only 1.8 months of supply of new homes which is the lowest its ever been. It is supply and demand economics – there is no housing bubble because there aren’t enough new homes being built to keep up with demand.
Rents will Continue to Climb in 2022
For those entering the homebuying market who currently rent, expect your rent to increase in 2022. Even with all the new apartment home communities coming online, there is still not enough inventory to meet the demand. Freddie Mac expects rents to increase by at least 3.6 percent in 2022 according to their 2022 Multifamily Outlook because vacancy rates are among the lowest ever recorded in the United States. The fact is that more people are choosing to rent for a variety of reasons and that has put tremendous pressure on the supply. If you are looking to buy a new home, now is the time because you will just be spending more money on rent this year if you don’t act soon.
Supply Chain and Worker Shortages
The COVID-19 pandemic put extraordinary pressure on the U.S. supply chain and on workers. When the pandemic started in 2020, many companies sent their workers home which stopped the production of goods needed for the construction of new homes. Since that time, everyone has been playing catch up. That has increased the prices of raw goods which are in demand right now. Couple that with the fact that many workers are selecting new career paths, there continues to be a backlog within the construction industry. These will begin to ease throughout 2022 but prices will continue to increase over the year by at least 3-4 percent. That is why it is better to buy now rather than wait.
At HHHunt, we believe it’s how you live that matters, and providing you with the best information is at the heart of who we are as a company. We hope that you found this useful and if you are interested in purchasing a new construction home, we invite you to explore HHHunt Homes.
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