There is a reason why so many potential home buyers are struggling to get their bearings. hot housing market today… Home prices are strikingly high and buyers find it increasingly difficult to afford them.
The median home price rose to $ 350,300 in May, according to the National Association of Realtors. That’s 24% more than last May, when the median home price was $ 283,500. It is also the highest real estate price on record and represents 111 months of price increases over last year.
Of course, rising house prices are a great thing for sellers. But many buyers are disappointed. Not only do they usually get prices outside of the areas that they could normally afford, but they also, in many cases, stretching your budget to an unhealthy degree.
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Can You Afford a Home in Today’s Market?
As home prices rise, many buyers are spending more than usual to buy their own home. But how do you know if you’re going to overdo it?
As a general rule of thumb, don’t buy a home that will require you to spend more than 30% of your paycheck on housing. There are exceptions to this rule, but for the most part, following it will help you keep up with everything your expenses.
To find out how much you can afford to spend on your home use mortgage calculator to figure out what your monthly principal and interest payments will look like. This will include factors such as the price of the house, the mortgage interest rate, and the down payment.
Keep in mind that your monthly payments will differ if you take out a 30-year mortgage versus a shorter-term home loan. This helps you run different scripts to see what you can swing.
If you calculate these numbers and find that you cannot afford the type of home you really want, it may be beneficial to postpone the search for a home until the market cools down.
Right now, low inventory levels are driving up the value of homes as buyers compete for a limited number of homes and enter the market. bidding war Left and right. As soon as there are more homes on the market, prices should start dropping, at which point you may find that the home you want is much more affordable.
Remember, paying too much for a house this is a dangerous financial move. If you delay your mortgage payments, you could end up ruining your credit rating and putting yourself at risk of foreclosure.
And even if you don’t delay your mortgage payments, if your housing costs are so high that you can’t keep up with other bills, you could damage your credit and end up in unhealthy debt. Therefore, it is recommended that you stick to this 30% rule and be honest with yourself if today’s house prices are too high for your budget.