With spring in full swing, it’s that time of year when the real estate market starts buzzing with activity. Whether you’re in the market for a new home or looking to sell, this is a busy season for both buyers and sellers alike.
Now, we’re not here to give you all the ins and outs of the real estate market or mortgage financing. There are professionals in those fields who can provide much more detailed guidance. However, we do have a wealth of experience when it comes to the financial aspects of buying a home.
If you’re thinking about entering the housing market this spring or early summer, you should know that broadly speaking, it is still an environment with low supply and high demand. What does this mean for you? Well, simply put, there are not enough homes on the market to meet the demand from buyers. This situation has been pushing home prices higher, even in the face of rising interest rates.
Speaking of interest rates, they have gone up significantly compared to a few years ago. With all these factors at play, it’s crucial for potential homebuyers to prepare financially. If buying a home is on your horizon, you should already be saving for key expenses such as your down payment, closing costs, moving expenses, and any repairs or updates you might need to make to your new home. We give more tips on the home-buying process in the video below.
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Video Transcript:
Hey, this is Alex and it’s episode 113 of Money Hacks. Spring is here and it’s getting to be homebuying season for those who are looking for or in the market to purchase a new place. Or if you’re in the real estate profession certainly a busy time of year in the spring and early summer when most individuals and families who are in the market to sell, to buy, to trade up a new property, start to get really active.
I don’t want to talk to specifically about it if I have a lot of opinions about the real estate market, about mortgage financing. But I’m certainly not an expert in comparison to real estate professionals or mortgage banking professionals where you can get much better guidance, counsel, and advice, but certainly have a good deal of experience and expertise talking around the financial aspects of the home buying process.
For those who are thinking about going into the market to purchase a property this spring, or early summer, it still appears to be a market that has very low supply and a lot of demand. What that means is there aren’t a lot of houses, there aren’t a lot of townhouses, condos, or properties in general that are on the market.
And there are a lot of people who are looking to buy. And that mismatch of supply and demand is something that has kept home prices propelled higher and even driven them higher, even in spite of a higher interest rate environment. So that’s my second piece, is that interest rates, and mortgage rates on purchasing a home are up somewhat significantly compared to where they were a couple of years ago.
We were in, you know, a really ultra-low interest rate environment in 2020 and even parts of 2021. And so rates have gone up somewhat dramatically. But getting back to a more normal interest rate environment, although they are the highest that we’ve seen in the last 20 years or so. And so that means when you go to purchase a property, it’s going to cost more on a monthly basis for the same total purchase price as you know, a house that where you’re looking at that purchase price a couple of years ago.
All those things said, it creates a lot of factors and a lot of considerations for potential homebuyers. The best advice that I can provide for those who are interested in hopefully finding a place, or finding a new home this spring or summer is how to prepare financially. So hopefully, if this is something you’re thinking about in the immediate future, you’ve already been in the process of putting money aside and saving for some of the key, really large dollar, large ticket item expenses that come with purchasing a property, including your down payment, your closing costs, moving expenses and cost of repairs or fixing the property up, or maybe buying some things for a new property nowadays are loan products that allow you to purchase a home with smaller percentages down maybe three, five or 10% down to based on which would you qualify for and the different products that are available. But then there also closing costs. These are excellent expenses to actually close on the property to transfer the title from the prior owner to you as the new owner.
And then add into that actually moving into the property and having to move all of your stuff, maybe buy new things, maybe fix things up. So it’s really important to plan ahead, to start saving in advance. And, you know, we talk a lot about how to automate savings. One of the things that I think is very beneficial and makes it easy to save for large financial goals like purchasing a property is to think out years ahead of when you want to be in the market for when you want to purchase that property and automate your savings that every month you’re setting aside X dollars into a separate identified savings account specifically for that financial goal for that home purchase.
The last thing I’ll say and whether this is the first home that you’re buying or you’re looking to buy a new property because maybe you’re moving or you want to get into a new neighborhood, or maybe you’ve expanded your family and you need more space, is to go through this process as objectively as possible, try to minimize the sort of the behavioral emotional component of buying if you are having a hard time.
It’s also okay to be patient and wait until you find the right property that matches what you’re looking for, what you need, and what you can financially afford. Hopefully, this helps, and hope you have a great spring. Good luck if you’re out there looking for a new property.
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