Home prices spiked 18% in July. Should you put off buying for the time being?
Today's housing market is a tough one to crack. Not only is inventory extremely limited, but home values have soared on a national level, making it more difficult for today's buyers to find an affordable place to call their own.
In July, the median price of an existing home sold rose to $359,900, according to the National Association of Realtors. That represents a 17.8% increase compared to July of 2020.
Now to be fair, there's been more activity on the higher end of the real estate market than on the lower end, so higher priced homes are skewing that average upward. But still, with housing inventory lacking in a very big way, buyers may have limited options these days for finding homes that fit within their budgets.
If you're in the market for a new home, you may be wondering whether it pays to go forward with your plans to buy or put your search on hold. Here's what you need to know.
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Does it make sense to buy today?
As of late July, housing inventory sat at a 2.6-month supply. For context, it generally takes a 4- to 5-month supply of inventory for there to be enough homes on the market to meet buyer demand. Because that's not the case today, a lot of the current homes on the market are apt to wind up in bidding wars, where two or more buyers go back and forth on the same property in the hopes of getting an offer accepted.
Bidding wars are great for sellers because they generally drive up home prices. But they can also cause individual buyers to pay more. And they can result in general price increases. Say a handful of homes in a given neighborhood land in bidding wars and sell for higher prices than they were initially listed at. That could inspire upcoming sellers to list at higher prices, kicking off a cycle that's harmful and limiting to buyers.
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It's for this reason that you, as a buyer, may want to back away from the housing market today and wait for inventory to get added. Once more homes become available, there will be less competition. That means fewer bidding wars and potentially lower prices.
Now you may be worried that by holding off on your home-buying plans, you'll lose out on today's low mortgage rates. But the reality is that mortgage rates are likely to stay low not only for the rest of the year, but well into 2022 and possibly beyond. So if you sit tight and wait for inventory to open up, you may be able to lock in an affordable mortgage and also pay a lot less for a home to start with.
Postponing your home search might also make for a less stressful process. These days, homes are spending an average of just 17 days on the market before being scooped up. That puts a lot of pressure on buyers to act quickly on what could be the biggest purchase of their lives. If you opt to delay your buying plans, you may find that you can not only snag a home that more comfortably fits into your budget, but that you can also do so without the stress you'd be likely to experience right now.
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