If you’ve followed real estate over the past year, you know that prices have increased and show no signs of returning to what we saw back in 2019. On average, price increases in the 10-12% range have been common across many markets, with some seeing even more growth. This price jump has led some homebuyers to give up their search for a new home. Sticker shock can strike fast and scare away buyers who are trying to find a home that meets their needs- and their budget.
While the current market has been kind to sellers, this is also a historically good time to buy a home. Why? While prices have increased, other factors have come into play to largely negate the effects of price increases. Consider a median home with a price of $325,000. With a 10% increase, you’re looking at a 2021 sale price of $357,000. An additional $22,000 is a lot of money at face value, but it’s important to remember how mortgages work- you don’t pay the entire sum at once, but rather make monthly payments.
The first positive factor for today’s home buyer are low interest rates. It’s been decades since we last saw interest rates this low- which means that your monthly mortgage payment will be less than if you’d financed the same amount a few years ago. At a 3.5% rate, the difference between $325k and $357k is only $131/month. While this is more money, we’ve also seen record wage growth. At 7% year-over-year rate, a median household income of $68,000/year could be seeing as much as $400/month extra. This means that wage growth is steadily outpacing price increases.
Don’t let sticker shock scare you away from finding your dream home. You can get more for your money today than you could yesterday! Economic factors have come together to create an excellent opportunity for those who are willing to invest in their future in some of the most affordable conditions in history.