Looking to buy a home? Keep these factors in mind.
The current housing market is an interesting one, to say the least. Right now, home prices are up on a national level while borrowing has gotten fairly expensive. That’s putting a lot of would-be buyers in a tough spot.
If you’re a buyer or real estate investor hoping to scoop up a home in the near term, May could end up being a difficult month to buy. Here are a few trends to keep on your radar if you’re hoping to become a buyer soon.
1. Mortgage rates will continue climbing
Mortgage rates have risen sharply over the past few months, and there’s no reason to think they’ll stop climbing in May.
A big reason why rates are up is that the Federal Reserve has signaled that it plans to raise its federal funds rate several times this year. The goal there is to help slow the rate of inflation, which has sent living costs soaring.
But as the federal funds rate rises, mortgage rates are likely to follow suit (as are other types of consumer borrowing rates, like credit card interest rates). And that could put buyers in a position where homes just aren’t affordable.
2. Housing inventory will remain sluggish
Normally, spring is the most popular season to list a home. But inventory didn’t pick up substantially in the spring of 2021, and there’s reason to believe we’re due for another spring of limited properties for sale.
As of the end of March, there were 950,000 homes for sale, reports the National Association of Realtors (NAR), which represents a two-month supply. That’s well below the four- to six-month supply needed to support an equalized housing market.
Now, you’d think sellers would be rushing to list their homes before mortgage rates climb even more. But that hasn’t happened over the past few weeks, so there’s reason to believe May’s level of inventory will be sluggish, as it has been for months on end.
3. Home prices will remain high
In March, the median sale price for existing homes rose to $375,300, according to the NAR. That’s a 15% uptick from a year prior.
Since housing inventory is unlikely to increase substantially in May, home prices are likely to remain elevated — even with mortgage rates climbing. Over the past few weeks, mortgage volume has declined, but not to any sort of extreme degree. And until more buyers pull out of the market, we can expect home prices to largely hold steady at today’s inflated levels.
Should you buy a home in May?
May could end up being a challenging time to buy a home due to higher borrowing costs, limited inventory, and sky-high home prices. If you’re looking to expand your real estate portfolio, you may want to look beyond physical properties in the near term and focus on REITs, or real estate investment trusts, instead. There are numerous REITs poised for solid growth in the coming years, and adding them to your portfolio is apt to be a lot less stressful than attempting to navigate today’s residential real estate market.