Whenever there are any shifts in the economy or stock market, heads turn to the real estate
housing market. The housing market is often the last to be affected when there has been an
uptick or downward trend in other markets — because the real estate market is resilient.
People are concerned about how a real estate market crash could affect their plans to buy or
sell real estate, especially given how timing can affect the success of your transactions
Should You Buy a House Now?
It is undeniable that home prices have decreased in the last year (contracted 3.1 percent year-on-year in May 2023), but that price reduction doesn’t mean you should buy a home now. When you’re making a decision about whether or not to buy a home, you should also take into consideration the interest rate, lending rates, and hiking cycles. These indicators will help you ascertain if now is the right time to buy.
Interest Rates/Lending Rates
Interest rates determine the lending rates, which, in turn, decide how much you will spend on your mortgage over time. If you’re pursuing a fixed-term mortgage, ideally, you want interest rates to be lower when you agree to a mortgage. As of June 2023, the U.S. interest rate is 5.25 percent, and the bank lending rate is 8.23 percent.
Fed Hiking Cycle
If you choose the more common adjustable mortgage rate, knowing whether the Fed is in a hiking cycle or not is vital. A fed hiking cycle is defined by multiple fed rate hikes from the month of the first increase to the month of the first decrease.
Inflation
Inflation isn’t necessarily going to dictate your mortgage costs, but it will affect whether you have the income to keep up with your mortgage payments, especially if this would be your first home purchase, as inflation could exacerbate the sting of being house poor. This doesn’t mean you shouldn’t buy a home now. Instead, you could leverage the lower housing prices to offset lending rates and inflation. The Fed rate hiking cycle also seems to be drawing to an end as the Fed recently decided to hold off on an interest rate, a sign that inflation has eased significantly and potentially the predecessor to a decrease.
Should You Sell Your Home Now?
Although the median house price year-on-year has decreased by 3.1 percent, this is not a sign of a housing crash. If you haven’t bought or remortgaged a home in the last year, this decrease shouldn’t be taken into consideration when selling, as most homeowners would still achieve a considerable net profit when selling their homes. Here’s why: The median home price has increased by 40 percent between May 2020 and May 2023, growing from $299,008 to $419,103. Home prices peaked in May 2022, reaching $432,311. There are fewer homes on the market in May 2023 than in May 2022, with the figure decreasing by 6.5 percent over the last year. Buyer interest is rebounding, as the number of homes sold above asking has reached 37.5 percent in May 2023, an increase of 16.2 percent since reaching lows in January 2023 of 21.3 percent. If you’re selling and intend to buy again, now is likely the optimum time to do that, as you can realize the value of your home while purchasing a home with a more reasonable price tag.
Market Segmentation: The Market in Central Wisconsin
The Central Wisconsin housing market has remained resilient even in these tenuous times. Homeowners can leverage the increase in interest to realize the value of their homes. Areas in Central Wisconsin, like Stevens Point, Plover, and Wausau, have been even less affected by the broader real estate market. This is evident by home sales in Stevens Point increasing by 39.1 percent in the last year. Median home prices in the state have also received a healthy boost, increasing by 15 percent in the last year, with the median home price in the state being $297,100 in May 2023, up from $258,000 at the same time last year. Sellers can also leverage the dip in housing supply, guaranteeing they get more than the asking price. Buyers can still get value too. Wisconsin is one of the cheapest housing markets in the U.S., and with a growing number of interstate migrants, prices in the state are forecasted to increase further. A trend that means it could be more challenging to find a bargain the longer you wait.
Final Thoughts
Of course, deciding whether to buy or sell a home now would depend on your personal circumstances. Speaking to a real estate agent about your goals, objectives, or misgivings will help you better navigate the market. If you have any questions or would like to work with me or you need a referral in your target market, please feel free to reach out!
-Ana
