The housing market is a complex beast. Many factors go into determining the condition of a real estate market, including home prices, inventory levels, and interest rates. While some of these trends have been consistent over the past few years, others have changed dramatically in recent months or years.
Here’s what you need to know about how the global housing market has changed recently:
Rising annual home values
In the past several years, climate change housing values have been rising sharply. In fact, even though home values are still below their pre-crisis peak, they’ve risen faster than income or rent in recent years. Home values have also not kept up with stock market gains over this period.
High mortgage interest rates
Mortgage interest rates are still near historic lows, but they have risen by about 1.5% since the beginning of the year. Mortgage rates are expected to rise further in 2022, which is bad news for homeowners and anyone looking to buy a house. However, homeowners who want to refinance their mortgage might benefit from high rates because they can get more cash out of their homes by refinancing at higher interest rates and paying off debt faster than previously possible.
Growing online real estate services
Today online real estate services are more popular than ever. Online real estate services can be used to find homes for sale, but they can also be used to find other services, such as mortgage brokers and home inspectors.
With online real estate services, you can compare homes for sale and decide which one fits your needs best.
Mortgage rates are still near historic lows
The current interest rate environment is favorable for consumers. Mortgage rates are still near historic lows and are expected to rise in the next year or two. Homebuyers should consider locking at a low rate while they can.
If you’re considering buying a home, get pre-approved for a mortgage before looking at homes. A pre-approval means that your loan application has been approved by the lender, meaning it meets certain criteria and will be funded if you decide on that home. But the lender has not yet issued an approval letter which would be called “finalizing your loan.”
Millennial homebuyers are expected to remain strong
Millennials are expected to remain strong.The largest generation in history, millennials will continue to drive sales of new homes through 2022. They’re more likely than previous generations to rent instead of buy, and they may face challenges saving up for a down payment on their own. However, most first-time buyers are millennials, so even if they do need help from parents with other expenses like furniture and appliances, this won’t stop them from entering the market later this year.
Prices will rise moderately over 2022 – 2023 as interest rates rise slowly over time
The Fed will continue raising interest rates gradually throughout 2022 until they reach 3% by 2023- a level not seen since July 2006 before housing prices started falling significantly three years later during the Great Recession (when rates were at 5%). While these increases could make borrowing costlier for consumers who want large mortgages or auto loans (both with fixed rates). Both sectors should continue growing steadily mainly because there’s currently no sign that inflation is rising rapidly enough, yet where consumers would feel compelled to act quickly out of fear that prices would rise soon after purchasing goods immediately. This is even though there’s always some uncertainty about whether such high expectations could actually materialize into reality at all times.”
More homebuyers than ever are adding contingencies to their offers
If you’re a homebuyer and have decided to use a contingency as part of your offer, make sure it is clear and well-written. A contingency should be worded so that it can be easily understood by everyone involved in the transaction: the listing agent, buyers’ agent, and title company.
It’s important to keep in mind that contingencies are not legally binding agreements. They are simply promises between buyer and seller. The only way for an offer to be accepted is for both parties to agree on all terms, including any contingencies or options (like inspections) included with the offer.
Why Invest in the Housing Market?
Investing in real estate has historically been a very lucrative way to invest one’s hard-earned money. Buying a home can be a great way to start investing in real estate right away, and it can help you get into the market before investing in something like stocks. There are many benefits to investing in the housing market, including the following:
- High ROI – You can have a high return on investment when buying property. This is because there are usually low maintenance costs involved and the benefit of having property worth more than what you paid for it. The cost of renting is also typically much higher than owning, so as an owner, you will see your wealth grow more quickly over time.
- Tax Benefits – If your income level allows, you can write off mortgage interest on your taxes. Because mortgage interest is typically tax deductible, you will not have to pay as much in taxes on your income each year if your tax bill isn’t already offset by other deductions or credits that you’re eligible for.
- Appreciation – The value of most properties tends to appreciate over time. It’s very common to see increases of 5% or more per year with properties held for at least a couple of years.
- Long-term value growth-You can buy inexpensively and sell high later, profiting from both the cost-cutting measures you took in buying your home and the increasing value of the property.
- Income potential-Landlords can receive income from renting out a property they own or even by having a tenant pay part or all of the mortgage each month. Depending on the circumstances, this could provide a steady source of income until you decide to sell or rent out your home again.
Key Takeaway
While the housing market has seen better days, it still has its benefits for an investor. For the savvy real estate investor, these benefits can be maximized to their potential and to your benefit. If you’re considering putting your money into real estate, there are plenty of reasons to do so.
