What you need to know about buying a home

A real estate agent stands in the doorway as Giovani and Nicole Quiroz of Brooklyn, New York visit an open house in West Hempstead, New York.

Raychel Brightman | Newsday LLC | News | beautiful pictures

Prices are higher almost everywhere.

Today, Americans are paying more for products like food and gasoline, due to rising inflation.

Of course, this increased inflation will also impact the cost of buying a new home.

“With inflation rising sharply and the fact that everyone’s wages and weekly earnings are not growing at the same pace, we should have less discretionary money to spend each month.”

At the same time, house prices are also increasing. The consumer price index, which measures the cost of goods and services, showed the haven rose 0.5% in October. It takes into account the owner’s rent and equivalent rent, which is what the owner will pay to rent their home.

Separately, home prices are up 19.8% year-over-year, according to S&P CoreLogic Case-Shiller Indices.

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So what does all of this mean for homebuyers?

First, you may have to reduce your budget, says Ratiu.

Not only will you have less money to spend every month, since you’re paying higher prices elsewhere, mortgage rates are also going up. An analysis by Realtor.com found that buyers of the median home are spending $160 more on their monthly mortgage payments than they did a year ago. Ratiu expects these rates to continue to rise.

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“Generally when we see inflation rising, we will see higher mortgage rates,” he said.

An inflation hedge

Real estate has always been considered a hedge against inflation.

Home values ​​traditionally have at least kept pace with inflation, and when you have a mortgage, you lock in a fixed monthly payment for the life of the loan.

“Houses are very expensive right now,” said Zillow senior economist Jeff Tucker.

Rents are more unpredictable than mortgages, he said, and are more likely not to increase. He predicts broader inflation will impact rents.

“If wages go up or if the cost of building materials and equipment, light bulbs and paint goes up, all of this goes to some degree in the cost of maintaining and building a home,” says Tucker. rent.

Supply and demand also have an impact on rents, which jumped 10.2% nationally last September, according to CoreLogic.

Advice for home buyers

Roberto Westbrook | Pictures of Tetra | beautiful pictures

Ratiu says whether buying an existing home is worth it depends on your circumstances.

For most people, owning a home is a refuge, although historically it has been a good investment. That said, there was also a time when family values ​​fell, he pointed out.

Therefore, it is best to think about your budget and time frame. If you plan to stay there for at least three to five years, that makes a lot of sense, especially when it comes to favorable interest rates, Ratiu said.

To be sure, buyers have faced stiff competition and bidding wars because of the limited number of homes on the market. However, Realtor.com predicts an easier time next spring.

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A Realtor survey this fall of 1,300 US homeowners found that 26% plan to sell their home in the next 12 months. This is more than double the findings in the March 2021 survey.

“I think 2022 promises to bring less competition, more homes to choose from and, as a result, far more accessible prices,” said Ratiu.

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