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Is It a Good Time to Buy a House? Here’s What The Numbers Say

January 19, 2022

The Highs and Lows of Interest Rates

When considering whether it's the right time to buy a house, it's essential to examine the market trends.

The chart below shows the value of homes in Minneapolis from 2012 through 2022, with projections for future years. Home values have consistently increased year over year, indicating a stable market with no signs of a repeat of the 2008 crash.

Several factors impact the demand and value of homes, including the 30-year mortgage rate. In 2021, mortgage rates rose gradually from 2.67% in January to 3.12% by mid-December, though they remained in the historically low 3% range until the start of 2022.

Forbes reports
that the average APR for the benchmark 30-year fixed mortgage rose from 6.87% to 6.97%, making it more expensive to buy and own a home. Despite rising costs, there remains a high demand for homes, making it challenging for buyers to find affordable options. 

Home Prices on The Rise

As mentioned earlier, the rising home values result in an increase in prices. However, it's crucial to understand the factors driving home prices up, with demand being the primary factor. The higher the demand for homes, the higher the prices. Realtors and real estate agents assess market demand by observing the duration homes remain on the market before selling.

In Minnesota, the ideal time to sell a house is during the summer months, when the weather is warmer, and homebuyers are less likely to worry about moving their belongings in the cold. Generally, the best month to sell a house in June, with the average time a house spends on the market before receiving an offer being roughly 35 days. Afterward, you can expect another 35 days to conclude the closing process.

The Challenges of Buying A Home in 2023

While there are many compelling reasons to purchase a home in 2022, there are also some significant challenges to consider. One of the most pressing issues facing home buyers is the limited inventory available on the market. 

With homes selling quickly and fewer options to choose from, it can be challenging to find the right property in the desired location and price range. If you're in the market for a new home, here are a few potential scenarios to keep in mind:

  • Be Open to Moving Across State Lines

    Choosing the right location for your home can be a challenging process. While it's ideal to find a property in your dream city, it may not be feasible given the current market conditions. However, there are other options to consider, such as moving to a different state, county, or city to find the right home for you. While relocating can be more difficult if you have children, remote work has become increasingly popular, making it easier to find employment in a new location if necessary. Ultimately, you'll need to weigh the importance of your desired location versus the perfect home for you and your family.
  • Consider a Fixer-Upper

    If you're attached to your current neighborhood and willing to invest some effort into a property, a fixer-upper could be a great option for you. A fixer-upper is a move-in-ready home that requires some work to bring it up to your standards. You can take on some of the renovations yourself, or work with a remodeling company like Sustainable 9 to transform the property to your liking. This scenario can be an ideal solution if you're looking for a home with character and charm and are excited to add your own personal touch to the property.
  • Determine Must-Have Features

    When it comes to finding your dream home, it's crucial to determine what features are must-haves. Whether it's ample natural light from large windows or a cozy fireplace, identifying your non-negotiables will help streamline your search and increase your chances of finding the perfect property. Take the time to make a list of the features you desire in a home, and consider prioritizing them based on their importance to you. With a clear idea of what you're looking for, you'll be better equipped to find a property that exceeds your expectations.

A Sellers Market

You may have heard from real estate experts and agents that the current housing market strongly favors sellers. While this is true, it's important to consider your options carefully before deciding to sell your home. One common concern is where to move after the sale, which can be a significant factor to consider. Another important consideration is whether buying a home in this market is a wise decision. The answer may depend on the size of the home you're looking for and your individual circumstances. By evaluating the pros and cons of buying versus selling in this market, you can make an informed decision that best suits your needs.

Choosing The Right Time To Buy

If you're a newly married couple, a young family, or just starting out on your own, you may want to consider waiting before buying a home. According to Forbes, the current real estate market is too good to be true. While it's a great time for longtime homeowners to sell and profit from their investment, it can be difficult for first-time homebuyers to purchase a home at the current prices. For example, the price of $310,000 for a first home is quite steep.

However, those who are looking to upgrade to a larger home may have better luck finding a deal. Many of the homes that are selling quickly these days are small to medium-sized houses, which means that larger homes can take longer to sell but may also present an opportunity for buyers. As we mentioned earlier, the longer a home stays on the market, the more likely it is to sell at a lower price. So if you're in the market for a larger home, it may be worth keeping an eye out for listings that have been on the market for a while.

To make the right choices and ensure you're making an informed decision, it's always wise to discuss these questions with a realtor or financial advisor. Keep in mind that purchasing a house is a major decision and requires careful consideration and planning.

  • Do you have a sufficient down payment to make the purchase? Secondly, 
  • Can you comfortably afford the monthly cost of a mortgage, as well as the closing costs and costs of moving? 
  • Is your credit score high enough to obtain a loan? 
  • Do you anticipate being able to sell the house for at least the price you paid for it in the future?

Keep in mind that purchasing a house is a major decision and requires careful consideration and planning.

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