Is now the time to buy a house or apartment?
Housing prices are very high compared to the average American salary. Is now the time to buy your first home? In the early 2000s, home prices were soaring and many people thought they couldn’t afford it. One reason was the overuse of predatory interest-only mortgages. Then, when the loans matured and collapsed, the market crashed. Then came the 2007 recession.
In 1987, home prices rose significantly in most major regions of the United States, and many owners took advantage of the wave by selling into newer, more expensive homes. Then a combination of home foreclosures and unemployment led to the terrible recession of 2007-2008.
House prices in 2023 will continue to be high for some time, partly due to the effects of historically low interest rates. Interest rates were kept very low to increase home purchases following the 2008 recession. After that, it seemed like it stayed low for far too long. Prices have soared due to low interest rate demand. According to the Consumer Financial Protection Bureau, the interest rate on a 30-year fixed conventional loan in California will increase from 6.8% to 7.8% in 2023.
Between 2010 and 2013, home purchase interest rates averaged 5%. First-time home buyers can qualify for lower interest rates if they have good credit and a large down payment. The problem with expensive areas is that they may be buying properties that are too expensive. If you’re a first-time homebuyer, there are some big perks.
From apartments to expensive condos
Currently, the trend in major cities is to convert apartments into condominiums. This makes rentals unaffordable for renters in some large cities. As a result, some renters lived on the street from their apartments. I can no longer afford to rent my few remaining apartments.
Until 2007, housing prices continued to rise. From 1963 to 2007, long-term housing increased primarily. (Federal Reserve Bank of St. Louis). Then, in 2008, a major financial crisis occurred.
The recession led to more foreclosures due to interest-only loans, unemployment, and perhaps the Iraq war. And in 2013, house prices rose just as they had before the crisis. Housing prices remained flat until 2018, but rose slightly around 2019. Home prices fell in 2020 and then started rising again. Probably due to the pandemic and business closures.
Home prices in 2023 are slightly down in some areas, but the supply of homes for sale is low. Lack of supply appears to be pushing up housing prices. Homeowners don’t seem to want to move as interest rates rise. Condos, which were formerly apartments, are usually the cheapest in the area. Condominiums are an attractive property for people who want to buy their own home for the first time. However, condos come with many issues and high HOA fees. You need to know the range of HOA fees.
Real estate price and location
There are many factors to consider when it comes to real estate prices.. Location is key. Real estate on both coasts and in densely populated areas is the most expensive and has increased significantly.
A factor that increases real estate prices is when large companies with high salaries are located in the area. Gentrification can also significantly increase prices. As with the pandemic, when remote workers move to cheaper areas, it can actually increase prices in those areas. Prices can rise in overcrowded areas where housing supply is low.
Is now the right time to buy a house or condo, with prices still high?
Home prices can vary widely in different states and even in neighboring cities. If large businesses close and multiple residents try to sell their homes at the same time, buyers may lose interest and prices may fall. Real estate in the Northeast and West Coast has higher home prices than in the South and Midwest.
Home prices have rebounded since the pandemic-induced lows of 2020. The main reasons are reasonable mortgage rates and a lack of housing. During the pandemic, a decline in lumber and labor created a housing shortage and increased prices. Another problem is that houses are getting bigger and the appliances and equipment are becoming more luxurious. Both of these drive prices up. In 1950, the average home size was 983 square feet; in 2015, it was 2,750 square feet. (Federal Reserve Bank of St. Louis).
Apartment turned into a condo
While surfing Zillow for one-bedroom, one-bathroom condos in San Diego, you’re in for a surprise. In California’s coastal towns, many apartment buildings have been converted to condominiums. This is happening all over California. Enter any major city and you’ll see buildings that look like apartments because they were originally built as apartments. Zillow lets you enter nearby home sales and shows you available homes that fit your price and budget.
Conversion to condominiums was recently done. Growing up in Southern California, identifying conversions was easy because many of these buildings were known as apartment buildings. How will this affect housing prices? First, apartments are no longer rented as apartments. Another reason is that condominium prices are high due to the lack of housing. These condos also have high HOA fees ranging from $350 to $500 per month.
One-bedroom, one-bathroom condos in middle-class areas are starting to cost $350,000 to $400,000. This is an attractive price for first-time homebuyers who earn well above average salaries.
Remote workers working in affordable areas
When the pandemic hit, many people fled crowded, expensive cities and were able to work from home. Home for many was a less expensive city, or even a state. This factor has increased prices in other states that were previously affordable. According to WFH Research, approximately 30% of the workforce is currently still remote at least part-time, impacting housing prices in previously affordable areas.
Extensive research required before buying a US home – MsFinancialSavvy
Currently, housing is in short supply and people who are staying at home are leaving.
Many people remain stuck because the government has raised interest rates, partly to put a stop to rising house prices. So, while home prices haven’t fallen as much, homes are still being actively sold due to low inventory. In larger and more popular locations, prices may be inflated. Type in the term “homes for sale near me” on zilliow.com and realtor.com to see options in your area.
New home sales in 2023
According to Census.gov and the Department of Housing and Urban Development, there were 683,000 new single-family home sales in March 2023. This is 9.6% higher than February’s 623,000 homes and lower than the estimated 707,000 homes for March 2022.
Average US home sales price
Median sales prices for new homes have declined, but remain high. As of March 2023, it was $449,000. The average home price was $562,000.
The median sales price for new homes sold in March 2023 was $449,800. The average sales price was $562,400. This is important information when buying a home for the first time. Although prices are high, they are on the decline and could fall further over the next five years depending on economic conditions. The inventory of newly built homes for sale was 432,000 units as of the end of March. This is a 7.6 month supply. (Census.gov) This is not a large supply
Are remote workers driving up home prices?
There are many factors that keep home prices high. Although prices have come down slightly from their highs, prices in some areas are still pushing middle-class workers out of the home-buying market. If you’re a first-time homebuyer, special programs can lower your purchase costs and interest rates.
To find out home prices in an area, go to Zillow.com or realtor.com and type in “homes for sale near me.” This will show you the number of homes in your area, along with home statistics added to your checklist, such as bedrooms and bathrooms.
Remote workers during the pandemic were one of the reasons home prices rose in many places. But the number of remote workers is decreasing, and there are many other factors that keep home prices high in densely populated areas. The reason is that some people have high interest rates for buying a home, while others have low interest rates. Many people don’t want to sell due to interest rates, so inventory is low.
Conversion of apartments into condominiums is another reason why condo prices are soaring, and may be one of the causes of homelessness in densely populated areas. When purchasing your first home or condo, know what HOA fees cover. These fees can be tricky and expensive.