Is Now a Good Time to Buy a House in 2022?

Buying a home is a big commitment: not only is it an investment and a financial undertaking, it means you will be living in one place for some length of time and take on extra responsibilities. In addition to this, the real estate market can be confusing, and you may not understand if it is a good or bad environment to purchase a home. The good news is that the question of whether it is a good time to buy is largely a personal one. But if you are considering new construction in Davenport, FL, we’ve broken down the current real estate market and what you should consider when making a decision.

Understanding the Real Estate Market

There are a number of factors that go into the market and determine its current state. In general, it is generally considered to either be a “buyer’s market,” which is good for purchasing a home, or a “seller’s market,” where it is a good time to sell. However, there is always some crossover. These are some of the most important things to take into account when looking at the market.

Supply and Demand

A neighborhood may contain any number of homes, but usually only a small portion of homes are for sale at once. The supply of homes for sale relative to the demand to buy them is what makes a market favorable to buyers or sellers.

A lot of homes being for sale without many interested buyers makes it a good time to be a buyer; when not many homes are for sale but a lot of people want them, it’s a good time to be selling.

Median Home Prices

The cost of each home will vary widely by the location, size, and other features in the listing. However, the median price can be a good metric to understand the market’s direction. Year over year comparisons are a good way to trace how much prices are going up or down each season.

New Construction

Supply is not based only on existing homes going up for sale, as newly built homes create additional supply. These typically cost more than comparable resale homes but come with other benefits.

Mortgage Rates

The interest rates associated with mortgages can impact how affordable a house is and how many people are purchasing. Low rates mean more buyers and less supply. These rates are influenced by a number of factors, including federal spending and the banks, credit unions, and lenders.

The Economy

Broader factors like employment, job creation, household formation, and wage growth all have an impact on the demand to buy homes. The more vibrant an economy is, the more people are looking to buy a home, creating more demand.

The Market in 2022

Now that you understand the factors that influence the real estate market, you can better decide if 2022 is a good time for you.

Current Disadvantages for Buyers

• Demand for homes is currently high while inventory is low, which means the market is more beneficial to sellers right now in the United States. The stiff competition for homes means there are fewer choices but higher prices, and each available home goes quickly. In September 2021, 86% of existing homes were off the market within a month.
• The median home price in September 2021 was $352,800, up 13.3% from September 2020. In every region of the country, prices rose.
• Mortgage credit availability has lowered slightly, with tighter credit requirements than in the past.

Current Advantages for Buyers

• Mortgage rates are at historically low levels in 2022, which makes buying a home more affordable in the long term. The average rate for a fixed-rate 30-year mortgage was 3.03% in October 2021.

Readiness to Buy a Home

Regardless of market conditions, it’s important to first understand and answer the question: are you ready to buy a home?. If you determine the answer is yes, you can then explore when and how it makes sense to move forward with the purchase. Below are some questions to ask yourself to help determine if you are ready to buy or build a new home.

Are You Staying Put?

You don’t have to live in your new house forever, but it’s wise to stay long enough that property values rise so that your equity will exceed the costs of buying and selling in the future. These costs include real estate commissions, mortgage closing costs, and potentially capital gains taxes. This means you will likely be there for at least a couple of years, so it’s important to be sure you are ready to put down roots for some time. Think about your career, relationships, family, and interests and if they line up with staying in the home.

Do You Have Job Security?

A mortgage is a big financial commitment, and you will still be expected to pay if you lose your job in the future. If you think this could happen, or you aren’t sure how stable your employment is, you may not want to commit to a mortgage yet.

Are You Financially Prepared?

Buying a home requires some large upfront investments, but it can also be expensive down the line. Property taxes, maintenance, repairs, and other costs may come up that require you to be financially stable. In addition to being able to secure a mortgage and put up a down payment and closing costs, you will want to have some financial stability after the fact as well.

There are three main pieces of your finances to evaluate:

• Savings. You’ll need to pay for mortgage closing costs, a down payment, and move-in-related expenses when you buy a home. These requirements may vary by lender and other factors, but you generally need to come in with some amount of money saved before purchasing.
• Credit. Lenders will typically offer more favorable rates and terms to buyers with credit scores of 740 or above, though a score in the 600s is usually enough to qualify you for a mortgage. Below that, there are fewer options. If needed, you may take time to build up your credit before purchasing.
• Debt. Lenders will also look at your DTI, or debt to income ratio, in determining if you qualify for a mortgage. This represents the percentage of your monthly gross income that goes toward monthly debt payments like mortgages, car and student loans, credit cards, and any other obligations. Most lenders will want this to be below 36% and may have a cut-off of around 50%. The lower your DTI, the higher your chances are of qualifying.

Choosing the Right Home

Some people like the idea of buying new a home. This can allow you to make customizations during the build process to avoid future renovations, as well as meaning you won’t need to make any major repairs for a while. However, a new construction home will usually cost more and may take a longer time than buying an existing home. You may also like the character of a historic home or want to DIY the renovations.

Location

Where you buy a home matters in a number of ways. While most people will choose a city near work, growing rates of remote work may mean you don’t have to decide in this way. However you choose, the city you live in may determine prices and market conditions. Within that city, the neighborhood may also differ based on taxes, quality of schools, and crime rates. Once you know the best geographic location for your family, you can begin looking at homes in that area.

Costs

Most people think about the cost of monthly mortgage payments when they determine their budget, but this isn’t the only component of affordability in a home. Depending on your down payment, you may need to pay additional private mortgage insurance for some time. Additionally, you will need to consider property taxes and if you are in an HOA, the fee. Homeownership also means you will need to inevitably cover repairs and maintenance over time.

Season 

Many people don’t know this, but the time of year you buy a house can have an impact on prices and supply. Springtime is generally considered a good time, as the school year is wrapping up, and people are more likely to begin relocating. However, this can also mean prices increase slightly or go more quickly. In contrast, winter tends to see the lowest prices but less availability. The weather can also make it difficult to see the outdoor areas of homes or to move.

The Bottom Line

The only good time to buy a home is when you are personally and financially ready for the commitment. If that is true, you will be able to ultimately make it work in your favor. However, 2022 does have extremely low interest rates that may give you the push you need to move forward.