If getting a house is in your plans and you sat out last year, you will surely want to know your prospects this year. Is it wiser to buy now or wait some more? Is it better to buy a newly built house or an existing house? How about buying a lot and then making a house on it? Getting as much information as possible is best to arrive at a well-thought-out decision.
Home Prices
According to CNN, the National Association of Realtors (NAR) reports that the median price in 2021 was $346,900. This was a record high and an increase of 16.9 percent compared to 2020. Federal Housing Finance Agency data show that in the third quarter of last year, housing prices increased by almost 20 percent over the previous year’s third quarter. The Mortgage Reports stated that by the end of 2021, the national median house price, according to U.S. Census Bureau data, was $416,900.
This year, Zillow predicts an 11 percent increase in housing prices. Some realtors told Houzer that they expect a 10 percent increase, while other experts told Zillow that they indicate a 6.6 percent increase. On the other hand, economists told NAR that they foresee a 5.7 percent increase, while Realtor.com has much lower expectations with a 2.9 percent increase.
Mansion Global reports, however, that data from Redfin shows that 2022 started with national median housing prices still shooting up to another record at $365,000 from January 2 to 9. This represents a 16 percent increase over January 2021. It is a classic supply and demand situation because the number of homes listed for sale nationwide was at a record low of 461,000 units in the four weeks up to January 9. That represented a 28 percent decrease over the same period in 2021. Meanwhile, demand increased by nine percent.
However, buyers must realize that prices vary widely across states and cities. For instance, according to MSN, the top five most expensive housing prices are in Salt Lake City, Utah; Boise, Idaho; Spokane and Spokane Valley, Washington; Indianapolis, Carmel, and Anderson, Indiana; and Columbus, Ohio. Stay clear of these areas if your budget is tight.
Some buyers think they can get a good bargain by buying fixer-uppers old houses. If you go this route, you first get a professional house inspection to determine the extent of renovations needed and how much that will cost. It can range from heating, ventilation, and air conditioning or HVAC repair, which is affordable, to critical structural damage that will need a significant rebuild. Calculate if you will come out ahead or with a loss.
Mortgage Rates and Loans
Another aspect of housing affordability is the prevailing mortgage rate. This determines how much you will be paying for your mortgage monthly. While high mortgage rates mean higher monthly payments, the good news is that this will influence home price increases to slow down. According to CNN, in the last week of January 2022, the average 30-year fixed-rate mortgage soared to 3.56 percent. That represents its highest rate since the pandemic began. In January 2021, it was at 2.77 percent. Mansion Global reports that Realtor.com and Redfin expect it to be 3.6 percent by the end of 2022, while Bankrate predicts it will reach 3.75 percent.
Home Construction
Another option for owning residential property is buying and building a house on a residential lot. Some people start buying a lot if they still lack funds to build. Lot prices also vary widely by state and county. Lawn Love ranked counties based on the average price per acre and corresponding estimated property tax. The five most expensive counties in which to buy a residential lot are San Francisco County, California; Kings County, New York; Hudson County, New Jersey; Santa Clara County, California; and San Mateo County, California. The five least expensive areas are Montgomery County, Alabama; Madison County, Alabama; Horry County, South Carolina; Mobile County, Alabama; and Sussex County, Delaware.
It would help to research the cost of home construction in the lot area, including other expenses such as permits and connections to utilities. This can likewise vary widely by state and county. According to The Mortgage Reports, the average cost to build a house in 2022 is $379,000. This excludes the land cost but includes permits, excavation, inspections, and other related expenses.
Keep in mind that builders are now encountering difficulties with high costs of construction materials and appliances, shortages, and delivery delays. Computations on cost and construction period may have to be changed several times, resulting in more expenses. These will also become your problems if you opt to build.
Things to Ponder
Given the pandemic’s current uncertainties, home construction can be risky. If you already own a lot, selling it and adding the funds to the home purchasing budget may be more cost-effective.
Also, since prices are predicted to continue to rise, albeit slower, purchasing sooner rather than later is wiser. You can also lock in a more favorable mortgage rate before it goes any higher.
