Home prices have climbed exponentially over the past year as tight inventory and low mortgage rates have boosted buyer demand. Now you would think that at some point buyers would have no more room in their budgets to keep paying sky-high prices. But home sales managed to rise in September despite the many reasons buyers pulled back.
In September, sales of existing homes were up 7% from the previous month, according to the National Association of Realtors. Meanwhile, the median selling price of an existing home hit $ 352,800, a 13% increase from the previous year.
At the same time, the number of homes available for purchase at the end of September was down 0.8% from August and 13% from the previous September. These days, the housing stock stands at a supply of 2.4 months nationwide. For context, it takes a 5-6 month supply for a more evened housing market (as opposed to today’s market, where sellers clearly have the edge).
Will homebuyers continue to pay higher prices?
While house prices can be high, low mortgage rates help offset them. There is no indication that rates are about to start climbing anytime soon, but buyers may not want to take the chance. That’s why many are willing to pay today’s sky-high prices for homes – they want to get in while the rates are still affordable.
One thing that could really help home prices go down is an increase in inventory. Whether this actually happens in the coming months is questionable. Historically, the winter months have not been a popular time to list a home, so there is a good chance that real estate inventory will remain slow until spring.
Additionally, many sellers have delayed listing their homes due to uncertainty fueled by the coronavirus pandemic. Given that the pandemic is not over, this sentiment could last until 2022. If that happens, the current lack of inventory could become an ongoing problem for the housing market.
Should you buy a house today?
Paying too much for a house could have negative consequences. First, it could mean having to take on a higher mortgage payment than you can easily afford. It could also mean having to bring in more funds for a down payment, which might require you to dip into your savings account for more money than you want.
Also, right now, home prices are inflated more due to buyer demand than anything else. In a few years, as the supply increases in the market, that demand may decrease and prices may fall. But if you pay a premium on a home now and have to sell it in a few years, you could end up suffering a loss.
That doesn’t mean you absolutely shouldn’t buy a home today. After all, the sales figures for September show us that buyers are still biting. Just be careful before you go ahead with a home purchase, especially if you’re not sure you can reverse the mortgage on it.