House Prices – One of the trickiest parts of trying to move is finding an affordable house in your price range and then working to secure financing. You have to be sure that you can afford the burden of the mortgage before you close on a house, and it’s hard to predict how much of an impact the mortgage payments will have on your household budget. In this post, we’ll talk about what is likely to happen in the housing market over the next several months and into next year, as well as what might change for mortgages, to help our prospective home buyers trying to decide when to move.
Home Prices and Locations
The prices of houses vary considerably depending on the region of the country, as well as the particular town or city in question. In the Raleigh triangle amenities like good transportation, good schools, proximity to jobs, and so on tend to drive up the price of houses because more people want to live in those areas. Most people know that already, but they might not know that those different factors also affect the composition of the neighborhood.
An older couple with kids out of school are not interested in good schools, so they will gravitate to other places. As a result, you can learn about your potential neighbors not only by the price of homes you are examining, but also by exactly what is pushing up that price. This matters because most people prefer to live near others of a similar age and life situation, so do your best to understand what exactly is affecting the price of any given house.
The Future of Home Prices
The housing market has seen some tough times lately. The exuberance of the pre-2008 years led to a massive crash that wiped out many people’s wealth. House prices are now once again starting to rise. This is a sign that demand for houses is also on the rise, and that’s a good thing for economic health. However, it also means that the last few years’ worth of low house prices are behind us. Barring another crisis, it is likely that house prices in general will keep rising slowly. Don’t expect a sharp rise, but don’t expect that if you scout out home prices in an area this year that they will stay the same next year. Jobs are coming back and that means more people are willing and able to buy homes. Competition for housing is especially tough in North Raleigh, Cary, and parts of Wake Forest, because those are high-growth zones, but prices are picking up all over the country.
Mortgages are a separate component of the cost of a house. The higher the interest rate you get, the more you’ll need to pay over the lifetime of the loan, and even a quarter of a percentage point can mean thousands. Part of the interest rate on mortgages comes from your own credit history, but part of it comes from broader economic conditions. Specifically, mortgages tend to rise and fall following the Federal Reserve’s fed funds rate, which is a baseline interest rate for the whole economy.
The Federal Reserve has kept the fed funds rate extremely low since 2008, and it has recently begun trying to raise rates again. Keeping rates low for a long time risks inflation and rising prices all over the economy, so the Fed is reluctant to keep rates low for any longer than it needs to. That’s why it raised the rate last year and plans to do so again at least once this year. But raising rates too fast risks harming the economy. All of this adds up to mean that it is very hard to predict exactly when the fed funds rate will increase, but the most likely case is that it will go up this year. When it does, it will push up other interest rates, including mortgage rates. So not only are house prices projected to increase, but mortgage rates are poised to go up as well, making buying a home more expensive through multiple channels.
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The bottom line is that we are leaving an era of historically cheap housing and mortgages. There is little chance of a sharp increase in either prices or rates, but both should start moving upward over the next several months. There is an outside chance of a crash, but in that case, the decline would be much less than in 2008 and would have less prolonged effects. If you are thinking of buying a home and moving in Raleigh or out of the area, take into account the fact that buying the house and getting the loan will become more costly, so you’ll need to pay a higher monthly payment and come up with a larger down payment. Once you’re ready for the actual move contact us to schedule your estimate