US home prices rose 17% y / y in May, Freddie Mac reports

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There is a reason why buyers in today’s real estate market are becoming increasingly frustrated. Housing prices have skyrocketed in recent months. mortgage rates and limited stocks triggered a surge in consumer demand. Now, those looking to buy homes are increasingly getting prices from areas they once could afford, and they are also losing homes left and right. bidding war

To get a sense of how much home prices have risen, house prices rose 17% in May compared to May 2020, according to the Freddie Mac House House Price Index. This is the highest growth in 12 months in the history of the index since 1975. It also represents higher growth than what was seen in the real estate market during the mid-2000s real estate boom.

But with house prices so high, the question is: Should buyers keep looking? Or is it better for buyers to postpone their search for housing at this stage and wait for prices to decline?

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It would be nice to wait

The fundamentals of supply and demand tell us that when a particular commodity is in limited supply, to the point where demand rises, prices will rise. This concept is certainly supported in today’s housing market. Bye housing stock increased slightly in MayWe’re nowhere near pre-pandemic stock levels, which means today’s buyers are prone to difficulties.

This even extends to buyers with a healthy budget to work with. Funding for a secure down payment means very little these days when buyers are so desperate for homes that they are willing to pay for them in cash.

Since the situation has gotten so extreme, for now, it may indeed be beneficial for buyers to sit back and postpone their home buying plans until there are more stocks on the market. It is dangerous to pay too much for a house. If a given buyer spends $ 500,000 on a home right now, which is typically only $ 450,000, and then needs to sell that home two years later, that buyer is at risk of losing money.

What’s more, if buyers stretch their budgets too far to afford today’s home prices, they may end up mortgage they try their best to keep up. This, in turn, could put them at risk of losing their homes.

At this point, mortgage rates are likely to remain low for a while, so give the housing market a chance to catch up. Buyers who step back and resume their home hunting in late fall or early winter may be more fortunate than those who insist on moving forward this summer.

When will things get better?

Housing prices have clearly risen strongly over the past year. How long will it take for them to return? We do not know this. But what are we do I know that now there is simply no good time to buy a houseand so many people would be wise to wait financially.

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