There's a reason buyers are becoming increasingly frustrated in today's real estate market. House prices have skyrocketed in recent months as low mortgage rates and limited inventory have spurred buyer demand. Now those who want to buy houses are increasingly being pulled out of the neighborhoods they once could afford, and they are also losing houses left and right in bidding wars.

To get a feel for how much house prices have risen, house prices rose 17% in May, according to the Freddie Mac House Price Index, compared to May 2020. This is the highest 12-month increase in the history of the index since 1975 It also represents a higher surge than the property market during the property price boom in the mid-2000s.

But with real estate prices so high, the question really arises: should buyers keep looking? Or are buyers better off at this point in time to put their apartment hunting on hold and wait for prices to drop?

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It might be worth the wait

The fundamentals of supply and demand tell us that if a certain commodity is available in limited quantities, prices will rise until demand booms. This concept is certainly maintained in today's housing market. While the housing stock increased slightly in May, we are still a long way from pre-pandemic inventory, which means today's buyers are struggling.

That goes for even buyers on a healthy budget. Nowadays, having the funds to make a solid down payment means very little when buyers are so desperate for homes that they are willing to pay cash for them.

At this point, as the situation has gotten so extreme, it could really pay off for buyers to put their home purchase plans on hold until more inventory hits the market. There is a risk of overpaying for a home. If a particular buyer is currently spending $ 500,000 on a home that would normally only cost $ 450,000 and then has to sell that home two years later, that buyer is at risk of loss.

Not only that, if buyers push their budgets too far to afford today's home prices, they could end up with mortgages that are difficult to keep up with. And that in turn could put them in danger of losing their home.

At this point, mortgage rates are likely to stay low for a while, so it pays to give the housing market a chance to catch up with demand. Buyers who slack off in late fall or early winter and resume their house hunting may be luckier than those who insist on moving forward this summer.

When will it get better?

Home prices have risen significantly in the last year. How long will it take them to come back down? We do not know that. But what we do know is that now is simply not a good time to buy a home, and so it might make financial sense for many people to wait.

source https://seapointrealtors.com/2021/07/24/u-s-home-prices-see-17-annual-increase-in-may-reports-freddie-mac/

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