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Why Now is the Time to Buy a House: The 2022 Real Estate Market

Now may be the time to buy a house. According to recent studies, it looks like 2022 will be a great year for real estate. The market is expected to slow down in 2023, so if you're thinking of buying, now may be the time to do it! Keep reading for more information on why we think this is the case and what you need to know about the 2022 real estate market.

What's the Best Time of Year to Buy a House in Denver?

Like with anything else, the demand and supply of real estate have an impact on what you can get for your money. You want options (supply), but you don't want to compete with everyone else (demand). You want to strike a good balance without expending too much effort timing the housing market.

That is why working with a local real estate agent when deciding on the best time to buy a property might be quite beneficial. When it comes to buying the ideal house seek out an expert real estate professional who specializes in the location you wish to reside in.

The following are the year-round trends in home purchase:

Winter Time

In the winter, the real estate market tends to slow down. People are less active (who wants to move in the snow?), so both inventory and demand are generally low. The longer you wait to buy, the better prices for houses will be. However, there's a good chance that you'll end up in a bidding war if you act now.

Spring Time

Spring is when houses start to go on the market again. Realtors and sites like Redfin will post more properties, giving you a lot of alternatives to choose from. According to data from Zillow, April typically offers the most alternatives. Keep in mind, though, that you'll be competing against other homebuyers who are looking to buy at the same time. So, if you find a property that you love, make sure to gather all of your mortgage application documents in case you receive an offer.

Summer Time

The springtime flurry of activity generally lasts through the summer. In the real estate sector, you'll likely notice a lot of stock and intense rivalry. There will be many houses remaining, but don't be afraid to rush if you discover your ideal house for a reasonable price. Because of increasing competition, the possibility may not exist tomorrow.

Fall Time

Typically, the optimum time to buy a house is during the early fall. Families have already settled in to their new houses before the school year began. However, despite the fact that there are still many houses on the market compared to other times of year, sellers may be eager to sell.

While buyers are, on average, getting better offers in September, this may not be the case for you. The real estate market is extremely localized and can be influenced by a variety of factors. In some cases, more competition may be found for a home half a block away from an active intersection than one next to it.

Is It a Good Time to Buy a Home or Should You Wait Till 2023?

The COVID-19 epidemic has had a significant influence on the housing market in 2021 and 2022, yet it has not resulted in house prices bottoming out.

When the housing sector shrinks, it usually leads to a seller's market, with a greater number of buyers than homes available and prices rising. However, this hasn't occurred in most areas. In fact, historically low mortgage rates are encouraging more people to purchase homes. Locking in cheap rates may save you hundreds of dollars over the life of your mortgage if you have a good credit history and a steady job. If you have a good credit profile and a secure employment, there are alternatives out there for you to get a loan.

If you're buying a home outright, you'll pay more for it. The interest rate reduction caused an inflow of new buyers onto the market, but the number of houses on the market didn't rise at the same rate. Because of this, you could be facing fierce competition depending on the local market. A home that would've been simple to purchase a year ago may now be flooded with bids, forcing you to act fast.

However, lending criteria have become more rigorous.

The requirements aren't as stringent as they were in spring 2020, when the epidemic began, but because of high joblessness rates, some lenders remain picky. Some banks have raised FICO score requirements by 100 points for government-backed mortgages like FHA loans, which means that fewer home buyers may qualify for a mortgage.

If you have a good financial position, you may want to borrow money at historically low mortgage rates. Even so, you should not be in a hurry since there is no indication that rates will go up any time soon.

When Would Be the Right Time to Buy a House?

Finally, the best time to purchase a home depends on your financial situation, objectives, and personal timetable. The real estate market has its own rhythms and quirks, but they aren't set in stone. Before you reach the offer stage on a property purchase, you'll want to make sure that everything is in order.

Before you begin the home-buying process, it's important to have your finances in order. You can't influence what happens with mortgage rates or the housing market, but you may take steps to prepare for a pleasant house-buying experience.

If you take the time to save for a down payment, closing fees, and strive to improve your credit score, you'll make the process much simpler. It's a lot easier to get approved for a loan if your FICO score is higher and you have more money in the bank. That isn't the only advantage, though. To those with the best credit ratings, lenders provide the lowest interest rates.

In addition, bringing a larger down payment to the table may help you save money by lowering your loan-to-value (LTV) ratio. The value of the mortgage is compared with the value of the property in order to establish your LTV ratio. An LTV of 90% means that a $90,000 loan on a $100,000 property has an LTV of 90%. Lower LTVs may help you get better mortgage rates, and if your LTV is lower than 80%, you won't have to pay for private mortgage insurance (PMI) on conventional loans. PMI costs an average of 1% of the loan sum each year. If you have a larger loan, you may save hundreds of dollars every month by not paying it.

It would also be beneficial to research into local housing assistance programs. A housing counselor can assist you in determining what down payment or closing cost assistance is accessible in your region. A HUD-approved housing counseling service may provide you with pre-purchase counseling and education services. Pre-purchase counseling services may be provided at a reasonable rate by these organizations, however the prices must be stated ahead of time. If you cannot afford the costs, these services must be offered for free, according to HUD.

What You Should Know If Buying a Home in 2022?

So far, finding a house in the 2020s has been incredibly competitive. Here are three facts that illustrate how crazy the housing market has become:

- From 2020 to 2021, American house prices will rise at an average rate of 17.5 percent—nearly twice as much as in a typical year during the 2010s. (In certain locations, such as Boise, Idaho, and Austin, Texas, prices increased by more than 30%.)

- The median number of days that a property was on the market in late 2019 was 51, according to Redfin. That figure fell to 24 in mid-2021.

- Meanwhile, almost two-thirds of consumers who purchased a home in 2020 said they put an offer on at least one property without viewing it first.

In other words, houses have been selling for more money and faster — even as buyers haven't been able to find much relief by broadening their search to new areas because it's happening across the country. “This is one of the more universal periods of zaniness that we’ve seen,” Issi Romem, the founder of the economic consultancy MetroSight, told us.

When considering a house under these circumstances, many first-time buyers are asking themselves the following questions: When will the housing market calm down? Is it better to plunge in immediately or wait if I want to purchase a home quickly? "It'll probably calm down a bit this year (but it'll still remain kind of wild)" and "You don't have to wait (but don't do something rash because of the frenzied market)" are the two simple answers based on my discussions with housing experts.

Despite the fact that property prices increased during the pandemic, it wasn't the cause—there's been a longer-term imbalance between supply and demand. The amount of houses being constructed in the 2010s was roughly half of what it was in the early 2000s, which means fewer homes are available now. Furthermore, Baby Boomers are continuing to live in their homes well into their golden years, which restricts supply. Meanwhile, demand has been buoyed by cheap borrowing costs (which make it less expensive for purchasers to borrow money) and demographics (Millennials, who are reaching their peak home-buying years, are a significant generation). If you combine these two things, it results in more individuals wanting to purchase homes than there are available. Freddie Mac, the government housing-finance firm, predicts that at the end of 2020, the United States will be short 3.8 million houses in satisfying demand from both purchasers and renters.

The epidemic didn't cause this imbalance, but it did exacerbate it. Construction was temporarily halted by a coronavirus-related construction pause and by building material shortages caused by the outbreak. The desire for spacious suburban homes increased as many Americans, particularly remote workers, redirected their attention away from city centers.

Even as certain variables decline in importance, the underlying shortage of housing will remain. As a result, the experts I spoke with recently did not expect prices to drop anytime soon, though they did anticipate them to climb at a slower rate in 2022. In fact, according to the National Association of Realtors, the most recent forecast from the trade association is that price rises this year will be around a third of those seen last year.

A rise in interest rates, which is anticipated to occur this year, might somewhat temper price hikes and bidding wars, as well as pleased homeowners and frustrated buyers. If prices rise quickly, "that will remove one of the fuels for this fire," Chris Herbert, the director of Harvard's Joint Center for Housing Studies, told me. The idea is that higher interest rates make borrowing more expensive, limiting consumers' spending power and lowering house values. It was also predicted in the past that if a recession ever occurs, it would have a big negative impact on home values, perhaps resulting in as much as 50% deflation. (Herbert also stated that if a crisis hits, real estate prices would likely suffer—but there are other severe consequences.)

You'd maximize your wealth and minimize your stress if you could magically pick a time when the market is cheap, go to buy a property, and select a moment when interest rates are low. The current marketplace's competitiveness means that now is not the time to be superstitious. However, identifying the appropriate moment to buy is close to impossible since perfect timing may only be seen in hindsight. “It’s hard to game the market—you’re bound to fail a lot of the time,” Romem, of MetroSight, said.

Herbert advised a mindset shift, one that I found far more soothing. “You ought to be making this as a housing decision and not an investment decision,” he said. If you're buying a home, he said, it should be because you intend to live in it for at least five years and ideally many more—which means that even if prices fluctuate, your investment will most likely appreciate over time. “The longer you stay in the house, the [less] your timing in this particular house-price cycle [will] matter,” he said.

It's unlikely that waiting for the market to calm down will be beneficial. “There’s not going to be an optimal point when prices dip and you can jump in,” Jenny Schuetz, a senior fellow at the Brookings Institution, told Denver Home Lifestyles. What's more essential is whether you have the financial means to buy a home. If you do, now appears to be an excellent opportunity a year from now.

Another major point to remember is that, in many areas, demand has been so high—and supply so low—that some purchasers have been willing to waive the conditions on their offer, such as finalizing their purchase after a home inspection. To prevent the second accident, do not approach any train that's been left unattended. As a result of the additional risk, Dr. Mark Schuetz advised against it. “If everybody else is buying in a frenzy, that doesn’t mean you should buy in a frenzy too,” she said. “Some of the people who win those bidding wars may not have made good decisions.” Rather of relying on the typical contingencies, even if it means delaying your purchase or looking for a different property.

The idea that we should take into account the subjective significance of home buying at an undesirable period is not intended to detract from the actual hazards of doing so. If you buy too late, for example, you may miss out on extra square footage, a shorter commute, or higher home value. If you have any questions about tips for purchasing a home in 2022 you can check out our blog: Home Buying Tips: How to Purchase a Home in Denver, Colorado

You can't always predict when the best moment will come. In other words, you might not know if the situation will improve or get worse. So forget about planning and just try to avoid thinking about it: if you buy a home and stay there for an extended period of time, you'll be better positioned to ride out whatever crazy is in store.

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