Is now the time to buy a house or apartment?
Housing prices are very high compared to the average American salary. Is now the time to buy a home for the first time? In the early 2000s, housing prices skyrocketed and many people thought they would never be able to buy. One reason was due to the overuse of predatory interest-only mortgages. Later the market collapsed when the loans defaulted and they collapsed. Then came the recession of 2007.
In 1987 home prices rose sharply in most major areas of the United States and many homeowners sold to ride the wave in new and expensive homes. Then came the combination of foreclosures and job losses that led to the horrific recession of 2007-2008.
In 2023 house prices are high and have been high for a while, partly due to low interest rates in the past. Interest rates have been kept too low to boost the housing market since the recession of 2008. Then they seemed to stay low for too long. Prices soared on demand for low interest rates. According to the Consumer Financial Protection Bureau, California interest rates on a 30-year fixed-rate loan range between 6.0% and 7.8% in 2023.
Between 2010 and 2013, home purchase rates averaged 5%. Those looking to buy a home for the first time, with good credit and a substantial down payment, will receive a lower interest rate. The problem in high priced areas is that they may be buying an overpriced property. When buying a home for the first time, there are important incentives.
From apartments to expensive apartments
Now the trend is to convert flats into apartments in big cities. This has made renting unaffordable for renters in some major cities. Because of this, some tenants went from an apartment to the street. He is no longer able to afford any of the few apartments left for rent.
Until 2007, housing prices were steadily rising. From 1963 to 2007, there was mostly an increase in housing held long-term. (Federal Reserve Bank of St. Louis). Then in 2008 came a huge financial crisis.
The recession caused many foreclosures due to interest-only loans, job losses, and possibly the Iraq war. Then, in 2013, house prices rose as they did before the crisis. Home prices leveled off through 2018, then picked up a bit around 2019. Home prices fell in 2020 and then started to rise again. This is likely due to the pandemic and business closures.
In 2023 house prices fall slightly in some areas, but the supply of houses for sale is low. Low supply seems to be keeping house prices high. Homeowners don’t seem to want to move with the higher interest rates. Apartments that were previously apartments are usually the cheapest in the area. Condo is an attractive market for first time home buyers. But condos come with a lot of problems and high HOA fees. You need to know what HOA fees cover.
Property prices and location
There are many factors to consider when it comes to real estate prices. Location is key. Property both on the coasts and in densely populated areas is the most expensive and has gone up a lot.
Factors that create high real estate costs are when there are large companies in the area that pay high salaries. Gentrification can also drastically increase prices. Remote workers moving to low-cost areas, such as in the pandemic, can actually drive up prices in those areas. Overcrowded areas with low housing supply can drive up prices.
Is now the time to buy a house or apartment, with prices still high?
Different states and even cities next door to each other can have drastically different home prices. If a large company closes and several residents try to sell homes at the same time, prices could drop due to a lack of buying interest. Northeast and West Coast real estate has higher priced homes than the South and Midwest.
Since the pandemic low of 2020, home prices have recovered. Mainly due to reasonable mortgage rates and housing shortages. During the pandemic, the decline in lumber and labor created a housing shortage that drove up prices. Another issue is that houses are getting bigger and appliances and fixtures are getting fancier. Both drive prices higher. In 1950 the average home size was 983 square feet, but by 2015 it was 2,750 square feet. (Federal Reserve Bank of St. Louis).
Federal Reserve Bank of St. 1975-2020 and $50,000-$400,000
Apartments converted to Apartments
When you surf Zillow for a one bedroom, one bath condo in San Diego, there’s a surprise. In California’s coastal cities, many of the apartments have been converted into condos. This is happening all over California. Enter any major city and there will be buildings that look like apartments because they were originally built as apartments. When you’re on Zillow, type in home sales near me for prices and available homes that fit your budget.
The conversion to apartments was recent. It’s easy for me to recognize the conversions because, growing up in southern California, I knew many of these buildings as apartments. What does this do to house prices? First, apartments are no longer rented as apartments. Another is that apartment prices are high because of the scarcity of houses. HOA fees are also high in these condos ranging from $350 to $500 per month.
One-bedroom, one-bathroom apartments in a middle-class area range from $350,000 to $400,000. This is an attractive price for first time home buyers with a much higher than average salary.
Remote workers in reasonably priced areas
Many people left overcrowded and expensive cities when the pandemic hit and were able to work from home. Home for many was an expensive city and sometimes a state. This factor pushed up prices in other states that were previously affordable. Currently, according to WFH research, around 30% of workers are still working remotely, at least part-time, and this is affecting house prices in previously cheap areas.
Massive Research Required Before Buying a US Home – MsFinancialSavvy
People who stay put are currently leaving a low housing supply
Because the government raised interest rates, in part to stop rising house prices, many are not moving. So while home prices haven’t fallen much, inventory is low, so homes are still selling at a brisk pace. Some, in bigger, more popular places, even raise the prices. Type in home sales near me on zilliow.com and realtor.com to find out the options in your area.
New home sales 2023
According to Census.gov and the Department of Housing and Urban Development, sales of a new single-family home in March 2023 were 683,000. That’s 9.6% above February’s figure of 623,000 and below the March 2022 estimate of 707,000 homes.
Sale price of the average US home
The median price of new homes sold decreased but is still high. as of March 2023, it was $449,000. The median home price was $562,000
The median sales price of new homes sold in March 2023 was $449,800. The average sale price was $562,400. This is critical information when buying a home for the first time. Prices are high, but they are coming down and may come down further in the next five years, depending on the economy. As for the inventory of new homes for sale, at the end of March it was 432.00. This is a 7.6 month supply. (Census.gov) This is not a big deal
Click the graphic for free information.
Are remote workers taking home higher rates?
There are many factors that keep house prices high. While prices have come down a bit from their highs, some areas have still priced middle-class workers out of the housing market. When you’re buying a home for the first time, special programs will lower your purchase costs and interest rates.
To find out how much homes are going for in an area, go to Zillow.com or realtor.com and type in, home sales near me. This will display a number of homes in your area with the home statistics found on the checklist, such as bedrooms and bathrooms.
Remote workers during the pandemic were one reason homes rose in value in many places. However, remote workers have declined and there are many other factors that keep house prices high in residential areas. Some reasons are that interest rates for buying a home are high for some but low for others. Many do not want to sell because of interest rates, and therefore inventory is low.
Apartments converted to apartments are another reason why apartments are high and may be a reason for housing shortages in residential areas. When you buy a home for the first time, as a condo, you know what the HOA fees cover. These fees can be difficult and expensive.
