“An Extremely Difficult Time to be a Home Buyer”There are a number of “takes” on the current housing market and whether we are in a bubble or whether much of the price growth is warranted. I’m not here to answer that particular question but this recent article by Ben Carlson at A Wealth of Common Sense does a great job of laying out the current facts of the housing market in the US. In 2016 I wrote a piece called Has There Every Been a Better Time to Be a Homebuyer? Here were some of my reasons:
- It’s easier than ever to shop for homes online
- Houses are now bigger, better and nicer
- Mortgage rates at generationally low levels
- People were still scarred from the housing crisis making it a good time to buy
Another problem for many people who live in up-and-coming cities is the fact that buyers from higher cost areas are driving up prices: You have people from places like California and Seattle moving to places like Boise and Austin and Nashville, making it harder for local first-time homebuyers to afford anything. Buying new is the best way to avoid making concessions and getting into bidding wars but lumber prices are making new homes far more expensive. Shortages have caused lumber prices to spike well over 200% in the past year: One report showed this has led to an increase of $36k in costs on average. For many who are building, it’s far more than that. Now for some anecdotes. This one from Kelman is, well, unorthodox: Someone sent us this news story from Austin, TX where a homebuyer not only paid for their own new house in cash, but also purchased the home the seller was moving into on their behalf: Unreal. You’re in a very tough situation if you’re trying to buy right now. Some people aren’t going to want to hear this but renting is becoming more attractive by the day. The St. Louis Fed created this house price-to-rent ratio: On a relative basis, it’s probably never been cheaper to rent in certain areas. This may not be a consolation prize for those who desperately want to become homeowners but renting for a while longer could be the solution for some people right now. Like anything, approaching a decision like purchasing a home shouldn’t be rushed. Understand the data points, know your financial boundaries, and let these help you make the best decision based on the information at hand.
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