When it comes to buying or selling a home, there are many factors to consider. Where you want to live, who should help you and why you want to buy or sell are just part of the equation. There are two things to consider when it comes to buying and selling – interest rates and inventory.
Interest rates are on the rise and have gone up about three quarters of a point since the beginning of 2018. They are expected to continue rising over the next year. This affects your purchasing power. Your “purchasing power” is basically your house payment. This chart gives you an idea of the increase in payments as interest rates increase.
Inventory is the second factor to watch. For a “normal” market, there should be about a six month supply of homes for sale in order for prices to only increase with inflation. According to the National Association of Realtors (NAR), there is only a 4.3 month supply of homes for sale, much less than the normal market of six months. Home prices have increased every year for the past six years.
Inventory of homes for sale has been on a steady decline for the past 36 months (July 2015 to May 2018) but the last three months has seen a slight shift in inventory. If we continue to see an increase in homes for sale, the market could be shifting to a more “normal” market rather than a seller’s market.
For those considering buying or selling, it’s a great time to talk to your realtor and loan officer and make a plan. That way you know what is best for your situation. We know interest rates are increasing, home prices may slow down – so that may help you offset the interest rate increase, but you never know for sure! With winter coming, it may be time to buy a home sooner than later!