Source: Entrepreneur —
The real estate market is in an interesting state right now. Home sales are slowing because of higher interest rates, but prices in some areas have yet to drop. Overall, the median existing home sales price in January 2023 was up 1.3% from the same time last year, but home prices in expensive areas have gone down, while prices in less expensive areas have gone up.
Considering that home prices were reaching record highs in 2021, one would expect them to have normalized with the slowing market, but that has yet to happen. However, if interest rates continue to rise, prices should continue to drop.
But what does that mean to you and your finances? This article will explore how the current real estate market can impact you financially.
Real Estate Situations that Can Affect Your Finances
There are several situations that you may find yourself in where the real estate market may affect your finances.
1. Buying a Home
If you’re in the market to buy a home, you’re going to pay a higher interest rate than you would have in 2021. However, the inventory of homes is high and the number of buyers is down. That means that you may have more negotiating power with sellers. Prices may be higher, but chances are, most sellers are very motivated which could put you in the driver’s seat.
But you’ll end up paying a higher rate, but with a lower price point for the home, so it may even out for you financially. You can also refinance later if interest rates go down and get ahead of the game.
Be sure to do your research into what is happening in your area in terms of prices and the number of sales that are occurring. Every local market is different. Make sure that your real estate agent talks to you about current comparable sales, and use your negotiating power.
2. Selling a Home
If you’re planning to sell your home in the near future, you may be under a bit of pressure. Buyers are fewer in many areas due to the higher interest rates, so the people that are buying have the negotiating power. If you can, you may be better off waiting to sell until rates go back down. However, what will happen with interest rates and when is a great unknown.
If you need to sell and you want to get a specific profit on what you paid for the home or on what you owe on your mortgage, you can calculate here what price you need to stick to.
Often the best strategy in this kind of market is to price your home higher than what you actually need. That way the buyer can negotiate and feel like they’re getting a deal. It cannot be stressed enough, however, that the best strategy depends on your local market.
Do your homework and talk to your real estate agent about what is happening in your market and what comparable homes are selling for. And if you need to make a certain profit on your home, you can stick to your guns and wait for that buyer that “must have” your home.
;
