The housing market is an integral part of the US economy. It is a complex, dynamic system. Several factors contribute to its fluctuations. Various factors drive the demand for housing. In addition, other factors, such as divorces and deaths, affect the demand for housing. According to experts, the US real estate market is expected to grow 7.4% to 16% by the end of 2022, with the supply and demand mismatch still favoring sellers.
Housing is the most significant portion of monthly expenditures. It exceeds the cost of the other two primary necessities, food, and transportation, put together. Housing accounts for 29% of the total, with food and transportation accounting for 10% and 13%, respectively.
This statistic isn’t that surprising. It’s common for housing expenses to take up a more significant portion of our budgets. However, with house prices and rent continuously rising, this percentage will continue to increase. Besides food and gas, inflation has also affected other expenses, such as rent. Across the country, the average rent price rises faster than the average wage. This puts people in a difficult position. The Federal Reserve recently increased interest rates by a quarter point to cool off the market. They plan on continuing to raise rates into 2023. The goal of this strategy is to discourage potential buyers from entering the market. In a worst-case scenario, most families won’t afford to spend half their salary on home costs.
Before the COVID-19 pandemic, many people thought renting was a great alternative to buying a home. It was less stressful and had shorter commitments. The median home value in 2019 was $231,000, more than double what it was in 1999. It took about two years for the value to double. The pandemic in 2020 caused the housing market to become more favorable to sellers. When there is a surplus of demand and interest rates are low, the opposite is true, meaning a buyer’s market. Since homes valued at around the 200,000 to 250,000 mark are now selling for around $50,000 to $100,000 above their market value, it can be challenging for people who rely on financing to purchase a home. Cash buyers are currently the ones with the most power. The demand for houses and apartments drastically increased due to the pandemic. This has added difficulty in finding affordable housing.
Before a person decides to purchase a home, they have to consider other factors beyond simply the price of a home. The age, inspection results, location, nearby schools, opportunities for growth, and overall safety are important considerations.