The pandemic has brought about some very unique economic circumstances which could have huge ramifications for people considering moving house this year. The economic recovery has triggered a spell of high inflation which is hurting consumers’ buying power.
The United States’ housing market is currently in a state of flux, with house prices sky-rocketing, high interest rates and rental prices on the rise too.
The S&P CoreLogic Case-Shiller Index found that by January 2022 home prices had jumped by 19.2% year-on-year, while the average cost of a single-family rental property had also increased by 12.6%. Now is an expensive time for housing, whether you are renting or buying, so experts are advising people to think what is actually required to satisfy their personal requirements.
Lexie Holbert, housing and lifestyle expert for Realtor.com, recommends: “If you’re not sure whether or not you want to rent or buy right now … it’s better to make your decision based on your personal situation and your personal needs.”
Timing is key when considering whether to buy or rent
The pandemic recovery has sent the cost of everything from groceries to gasoline soaring and consumers are unlikely to find any real bargains until the markets begin to level out. However we don’t know how long that is likely to take and housing is often a very time-sensitive decision.
The key difference between mortgage and rental agreements is the duration, with rental contracts better suited for short-term moves. Holbert advises that buying a property does work out as cheaper in the long run, but that it can take between five and seven years for a homebuyer to recoup the purchase costs.
“If your home needs are going to be pretty consistent and pretty stable over the next few years, now may be a really good time to buy for you,” Holbert said.
“If they’re changing, you may want to consider renting so that you have the flexibility to move.”
However if you feel like this could be the right time to get on the housing ladder and you are willing to wait, there could be better value on the horizon. Mortgage rates are expected to remain high, likely above 4%, for much of the year, which could squeeze some prospective buyers out of the market.
Holden Lewis, home and mortgage expert at Nerdwallet, believes mortgage rates could be above 4.5% towards the end of the year. With this in mind, there could be less competition for homeowners.
Lewis says: “The combination of rising interest rates and rising house prices will push some would-be buyers out of the market, which may result in reduced competition after the summer buying season is over.”