The Crazy Housing Market :: Why It’s Up and When Will It Go Down?
We have officially outgrown our 1800 square feet, three bedroom house and are in the market for a new home for our growing family. It’s a terrible time to be house hunting.
I used to laugh at the show “House Hunters” because it seemed like every couple had off-the-wall careers like butterfly harvester and local co-op farmer, but had a budget of $750,000. These days, it feels as though everyone in the housing market needs a budget like that. It had me wondering why is the market so crazy right now and when will it come back down? I love learning and I started researching to find out these answers in the hopes that an easier new home search is in my future.
The housing market over the last two years has been insane with the price of housing setting a record high and the inventory of homes setting a record low. Just do a quick search on Zillow, Trulia, or Realtor and the asking price of a very modest two bedroom home will blow your mind. The good news is the Louisiana median home price is lower than the national average at $221,000. But does this mean I need a budget of half a million dollars for a 2,000 square foot home, because it sure seems that way, yikes!
Why the sudden increase in price and low inventory?
The economy began shifting two years ago and we saw price inflation everywhere from gas to groceries. To keep up with inflation, the Federal Reserve raised interest rates. This raised mortgage rates for home buyers. As a result, two things happened: buyers quickly made offers on available housing in an effort to lock in a certain interest rate before it went up and sellers stayed put and decided against selling and dealing with higher mortgage rates.
What does the BR housing market look like in numbers?
In December 2021, there were 385 homes sold after an average of 22 days on the market. In December 2022, there were 204 homes sold after an average of 35 days on the market. Homes in Baton Rouge receive two offers on average and are priced at around $130 a square foot in a typical market.
Does this mean the housing market is improving in 2023?
Yes and no. Forbes predicts more advantages for buyers by having more homes for sale. But increased inventory is the result of houses taking longer to sell because of affordability. This means we are still going to have higher than normal pricing and mortgage rates aren’t expected to fall all that much, maybe to 5.7%. Home prices may fall compared to what they were in 2022 but we will still get sticker shock at asking prices. Economists are calling 2023 a “nobody’s market.” Lovely.
So what do we do?
Life doesn’t stop just because we are in a crummy housing market. People are still getting new jobs and relocating, having babies, and needing new homes. The solution to the dilemma is to shop around. The competition isn’t what it was last year where you had to make an offer immediately or risk losing out on the home. With more inventory on the horizon, this means it is okay to take your time in finding the perfect home for your family and your budget. You also have time to shop around for the perfect mortgage rate, even an adjustable rate mortgage. Taking out an adjustable rate mortgage instead of a typical 30 year fixed rate mortgage to finance 80% of a home price saves buyers $225 per month on average for the first five years. Be prepared by using online loan calculators to figure out what you can afford and carefully look over all of the loan disclosures for your options.
When is the best time to buy?
When it is cold! Spring and summer months are the worst time to buy with homes at prices above market value. Economists say May is the absolute worst month for finding a deal. The best time to buy a house is fall and early winter. January had the lowest prices for winter months, but realtors predict March to have the best inventory. This means shop around now or wait until the fall.
While I am eager to get into a new home that fits our growing family, I am patiently waiting for the right fit. To combat my restlessness with our current busting-at-the-seams situation, I tell myself home is wherever we are together.