The real estate market in our state has experienced significant volatility over the past few years. This is due to many factors, not all of which are controllable or reversible. With that being said, there are some fundamentals for the market that we can talk about. These include what kind of activity the market has seen, how motivated sellers are, and whether or not buyers have access to housing.
If you watch the news, read business magazines, or listen to financial podcasts, then you’ve probably heard lots of talk about how expensive buying a house is in the United States right now. A lot of this conversation focuses on why it is so difficult to find a home with a cheap monthly payment, but almost never talks about what may be preventing people from finding a home closer to budget.
In this article, we will discuss two major things that can make purchasing a home more expensive than expected- interest rates and taxes. We will also look at some strategies to keep your costs down if you want to buy a property soon!
We will begin by talking about how much money most people spend on a mortgage before moving onto discussing how tax laws affect who receives credit for paying off their house faster. Then we will talk about how rising interest rates change the math involved in owning a home.
To conclude, I would like to tell you about one of my favorite ways to save money when investing.
Rising mortgage rates will affect the market
Recent changes to federal lending guidelines have increased the minimum required debt-to-income ratios for most home loans. This has left many buyers with lower budgets, making it harder to go up in price or find a house that they can afford.
Rising interest rates are also going to make buying a new house more expensive as sellers will be able to demand higher prices due to the cost of financing a down payment and monthly payments.
While rising costs are already having an effect on the market, we expect them to hit a slump around January 2020 when the housing market is typically at its strongest. It’s important to remember that while these trends are very negative for current homeowners, they’re actually a good thing for future ones!
As mentioned before, this is when strong economic growth occurs because people who hold onto their homes enjoy spending money on houses later on. Also, since investors look forward to getting a low rate return on their property, they’ll spend less money during the sale process, leaving more cash available to invest.
So how does all of this relate to you? As a potential buyer or seller, be aware of the effects changing market conditions may have on your own plans.
Buyers need to have good credit
As we mentioned, the housing market looks very different for various reasons. One of the main factors is that most people do not feel confident about buying or renting an apartment or house due to poor weather conditions and/or bad economic situations.
Another factor is that many potential buyers can’t afford a home due to tight financial resources. A third reason is that some borrowers with weak credit just don’t meet the demand for homes that banks are willing to loan money for.
With so few houses available and high prices making it tough for average consumers to enter into the market, those without strong credit are left out. This situation only gets worse as time goes by!
Luckily, there are alternatives to directly purchasing a property. Some savvy individuals choose instead to invest in REO (Real Estate Owned) properties or loans.
A lot of big bank branches will sell their less desirable real estate or foreclose on mortgages that they cannot repay. These properties and loans are called REOs because the bank owns them but they are still under contract.
These types of investments may be more lucrative for investors than buying individual homes. By investing in lots of different properties and loans, you increase your return on investment.
This article will talk more about how to invest in the real estate market and what things can hurt your returns.
Sellers should try to list their home for as much as possible
As we continue to see drops in sales, there are many different theories about why this is happening. Some say that with technology making us less reliant on things like phones and computers, people have less need to own them, so they put off buying one or even deciding if they want one.
Another theory is that because of the increasing amount of debt most Americans now owe, they feel too pressed upon to buy something new due to it. They may also believe that paying more money up front will keep them from having to pay higher interest rates down the line.
Yet another reason could be that people simply cannot afford to purchase a house at present. Due to high monthly housing costs and rising prices, individuals can’t maintain their current level of spending and still save for a house.
Sellers who choose to remain in their homes longer might be giving discounts away by reducing the price slightly, but then finding themselves without a tenant when they eventually move in.
Home prices have increased in every region
While many people believe that buying or renting an expensive house is the best way to increase your wealth, this isn’t always the case.
A few years ago, owning a home was the only option for most people. If you wanted a new car, you had to buy it yourself!
Now, there are several ways to spend money if you want to own a home one day. You can choose from low-cost strategies like investing in a savings account that pays no dividends, taking out a mortgage loan against the value of your current home, or paying slightly more than average to live in a less affluent area with homes that aren’t as fancy.
Don’t get us wrong — having a large house is definitely wealthy, but it’s not necessarily the smartest thing to do. It’s just too big a purchase unless you really need a lot of space.
Home price growth has slowed down since the boom times we experienced earlier, but they’re still increasing overall. This means that even though you may be able to afford a similar sized house back when you first started looking, it probably won’t be enough income anymore.
Look at the Jersey City market
While other areas of the state are experiencing an increase in home values, some markets are actually seeing prices drop! This is very surprising as many areas have limited housing supply and strong demand due to the growing population.
One area that has seen significant price drops is within our borders. Although it may not be common knowledge, the real estate market in Northern New Jersey (the region including Bergen County through upstate New York) has been heating up for quite some time now.
Home values have increased substantially over the past few years, which is great to note. However, what we find slightly confusing is the fact that although house hunters are having a hard time finding homes, they are also paying more than ever before for those houses that they do locate.
This article will discuss some reasons why this happens, as well as some ways you can work around it if you are looking to purchase a home soon.
Check the market conditions in each borough
As we mentioned before, every real estate area is different and has its own unique set of circumstances that affect how it performs. There are no clear-cut answers for what will make the housing market rise or fall, but some things can influence sales and rentals more than others!
Certain neighborhoods may have better public transportation than others, making it easy to travel to work. Or maybe there’s a great school district close by, which makes it easier to get your child into the right place.
If you’re looking to sell your home, then offering it well below market value could be a good way to find a deal. But remember, if you do this too much, people who want to buy a house won’t even consider yours as a selling option.
We also talked about how buying a house is expensive – especially when you factor in closing costs and fees. A lot of these expenses vary from lender to lender and situation to situation, so doing your research is important.
Selling your house can be just as expensive, unless you’re listing with a professional broker. And hopefully you’ll save some money by buying a house instead of renting, but only if you know where the best places to look are.
Contact your local REALTOR®
As we continue to navigate this ever changing market, it is important to stay connected with those that know it best. The real estate industry has lots of different professionals with diverse specialties, so don’t forget about them!
As you can imagine, not all Realtors are created equal. Some will put more effort into their job than others, but they all have one thing in common: an obsession for houses!
The importance of having a good relationship with your Realtor cannot be overstated as they are a key part of how well you do business in the future. They will also help you find the next house!
It is very important to evaluate a Realtor’s professionalism, reliability, and effectiveness before you work with them. While some may be louder or bolder than other people, there isn’t much anyone can do if they aren’t talking to you!
Some things to look for include: does she listen? Does she answer questions clearly? Does she seem interested in helping you achieve your goals? If you get the sense that she is just trying to make a sale, then chances are you have found yourself a bad sales person, not a bad Realtor!
We recommend staying away from agents who try to be flashy or talk too much about themselves, instead focus on what kind of person they are and whether they appear to care about people.
Stay informed about market changes
Although there have been some slight improvements in the real estate markets across most of our state, it is important to stay informed as to what is going on.
It is very common for things to get overheated during a hot housing market. The same thing can happen after a recession! This is why it is so important to remain up-to-date on your real estate market conditions.
You should always monitor the local real estate market conditions and be aware if anything seems off or weird.
If you are looking to sell your home, make sure that you know how much house similar homes sold for in the area. An experienced seller knows how much their home is worth by comparing it to others.
Sellers also need to know whether or not their property is undervalued or overpriced.
