The nature of the housing market is tied to the choice of flexible or fixed communities. The market for land is irrelevant in the frontier models because land is assumed to be available in unlimited amounts at a fixed or no charge. Housing services simply become part of the composite commodity. By contrast, the housing market can become a central feature of a fixed community model, especially if the number of housing sites is fixed.
A housing market also allows for the possibility of using property taxes to finance local public services. As a general rule, the operation of housing markets prevents an economy of fixed communities from reaching a first-best optimum. This is especially so in models with property taxes because the property tax is often viewed in the federalism literature as a distorting tax.
Housing Market Predictions for August 2022
Many housing insiders warn buyers against trying to time the market as the economy wades through this period of uncertainty.
“Deciding to buy now or wait is going to depend on the individual buyer’s motivation and situation. Waiting may not be a viable option,” says Krista Forsberg, a real estate agent at Keller Williams Realty in Edina, Minnesota. “Even if a buyer can push pause on buying to later in the year or 2023, there isn’t likely to be significant improvement in prices or interest rates.”
Housing experts say they are keeping a watchful eye on the economy, which is being pulled in all directions by inflation, skyrocketing gas prices, the war in Ukraine and Covid, to name a few. While housing has been the star of the U.S. economy the last few years, there are signs of wear—namely, rising interest rates making it harder for buyers to access affordable housing.
“I believe the stark rise in interest rates scare both buyers and sellers; they don’t know if the rates will stay or continue to increase. This lack of predictability causes many buyers and sellers to just sit and wait,” says Steve Simmons, founder of October Real Estate in Los Angeles. “But others will scramble for a sale or purchase before things get worse.”
Existing-home sales dropped 5.4% from May to June, marking the fifth consecutive month of declining sales, according to the National Association of Realtors (NAR). However, the median sales price of these homes reached a record high of $416,000 in June, up 13.4% from a year ago. All of this indicates home prices are not dropping anytime soon.
Will Home Prices Continue to Rise?
Inflation, high mortgage rates and record-high home prices are chipping away at housing affordability. A typical monthly mortgage payment is 75% higher today than it was in June 2019, according to a report by Zillow. And earnings aren’t keeping up with the inflated costs. Wages grew 6.7% in June, falling behind the 9.1% increase in inflation.
MBA economists also don’t see home prices falling in the near future. They reported a median sales price of an existing home at $361,400 in the first quarter, which they expect to go up to $402,000 in the second quarter followed by a slight leveling off at $379,000 in the third quarter.
Tips for Buying in a Hot Housing Market
Start with a budget and make a pact with yourself to stick with it. Even with a slight uptick in the number of homes for sale, buyers are still facing steep prices and mortgage rates in the 6% range.
“There are a lot of factors going into buying right now, and frankly, a lot of people are scared to make a mistake,” says Jennifer Baptista, a real estate agent at Fresh Starts Registry in Andover, Massachusetts. “As a seasoned agent, I ask my clients first and foremost, ‘What does your gut say?’ If the [timing] feels wrong, you will always find the wrong home, so just wait.”
Rachel Luna, the principal of Patriot Title in Houston, also advises buyers to slow down. The scarcity mentality in the market has driven people to make fast decisions, which can quickly turn into buyer’s remorse.
The problem is you can’t return the house if you realize. You overpaid or just bought a place you don’t like. The seller’s costs can run up to 10% of the home’s sale price. So you could end up losing money if you turn around and sell it.
“Be patient,” Luna says. “What really matters when purchasing a house is your personal finances and long-term economic stability. Ask yourself: Are you debt-free? Do you have an emergency fund for three to six months of expenses? Will your monthly house payment be 25% or less of your monthly take-home pay? If you don’t comfortably meet these qualifications, it wouldn’t matter if the market is in your favor.”
Tips for Selling in a Hot Housing Market
The first step for a successful sale is to find a listing agent who. Knows the area and comes highly recommended. A good agent will work closely with you to price. Your home competitively while fielding questions and offers from prospective buyers.
Meanwhile, present your home in the best possible light. Not everyone has cash dedicated to renovations and repairs, but a little sweat equity can go a long way. The first step is to declutter, organize and clean.
Tuck away stacks of bills and receipts, store toys and make sure your kitchen is tidy. Bright lighting is also a great way to make your home feel spacious and light.
Even if your home is outdated, a clean space gives buyers a chance. To envision the potential of the new home.
Housing provides shelter, obviously, but it also serves other needs in developing countries. Housing is a location for business and provides other intangible emotional and cultural benefits. As in the developed world, housing activities in developing countries have economic benefits beyond the housing sector
The primary factor influencing demand for housing is the price of housing. By the law of demand, as price decreases, the quantity of housing demanded increases. The demand for housing also depends on the wealth of households, their current income, and interest rates.