Homeowners Benefit From Price Increases
As we have previously discussed in our real estate blog, home prices have surged throughout the United States. According to the National Association of Realtors, NAR, home prices rose in 99% of measured markets. In fact, 78% of measured markets saw double-digit price gains. Fortunately for many buyers, especially first-time home buyers, that trend is looking to slow. With this trend looking to slow, it is giving some relief to those hit hardest, buyers. However, homeowners have benefitted from price increases, while buyers were hit with the reality of affordability being slashed. Here is how homeowners benefit from these record prices.
With home prices looking to continue to increase, albeit at a slower pace, buyers may finally walk away with the home they wanted. This comes as bidding wars and pricing battles are also continuously slowing down. With expectations of more homes hitting the market next year, even at low amounts, home prices will look to slow. As inventory starts picking up in the market, and interest rates continuing to rise, the real estate price increase we saw this year should reduce.
Some more statistics coming from the quarterly NAR report may excite buyers. Markets with double digit increases decreased from an astonishing 94% down to 78%. While that is quarter-to-quarter numbers, they do provide some hope that prices are beginning to slow up coming into 2022. Homeowners are looking to be true wealth winners since the start of the pandemic. With home prices rising by double digits in almost every major metropolitan city in America, equity has never been higher. In fact, research shows that homeowners gained an average of $51,o00 in equity in 2020 to now.
Bidding Wars And Inventory
With existing home sales median price rising 16%, lower-end buyers have been priced out in most markets. Finding homes in the sub-$175,000 range in the Louisville market has proven to be quite difficult. This led to multiple instances of buyers having to enter bidding wars in order to get a home that is already selling for a double-digit increase. We have seen bidding wars slow throughout the third and forth quarter compared to the beginning of 2021. While bidding wars have slowed, competition for homes has not. Most markets are experiencing the lowest time-on-market times in decades, meaning competition is still fierce.
As we see the competition for homes on market continue, it is important to note that affordability is suffering. With home prices increasing to record highs month-over-month, the affordability of mortgage payments has lowered. The median family income dedicated to mortgage payments increased to 16.6%, up from last years 14.9%. Bidding wars influenced some buyers to purchase homes at prices that are less affordable. In many instances, buyers have experienced buyer’s remorse based on the current market’s condition.
Homeowners Benefit From Prices
Those who have been able to benefit the most are those who have been homeowners for the past 12 months. Due to rapid increases in home prices, homeowners have seen rapid increases in equity. According to the U.S. Home Equity and Underwater Report, 39.5% of mortgaged residents were considered equity rich. There is many ways that homeowners can take advantage of their increased equity. Because most homeowners do not realize the benefit of home equity, their equity is often just sat on. In the third quarter of 2021, we saw no more than 50% owed by homeowners on their residential properties.
Homeowners are able to sit back and enjoy the price increases yet again in the third quarter. In fact, many homeowners were able to smile while home prices increased at record levels. People who hold a mortgage and have for a few months to years have seen the balance sheets and net worth increase alongside home prices. While there is some uncertainty creeping in, there is no doubt that homeowners will continue to benefit. With inventory staying low and prices rising, albeit at slower rates, homeowners are going to be the true winners from relentless price increases.
While the acceleration of home prices is slowing, the market is still highly competitive and based around sellers. Affordability is going to remain strained in the new year, and buyers look to remain on the edge. Sellers look to continue to hold all the cards and that trend does not look to stop anytime soon. If you are a puzzled buyer, we are here to help you find a home in your area. And if you are a homeowner wanting to capitalize on tremendous equity gains, we can make that work. Contact the Premier Homes Team to find out the best course of action.