If you've been following the housing market, you may be aware that home prices are just plain out of hand. During the first quarter of the year, the median sale price for an existing single-family home rose to $368,200, as per the National Association of Realtors. That's an annual gain of 15.7%.
For context, homes typically appreciate around 3% to 4% a year, so 15.7% is a sizable jump. And it's coming at a time when mortgage rates are also up across the board, making it difficult for everyday buyers and real estate investors alike to get a piece of the housing market.
Now, without a crystal ball, we can't predict how long these soaring home prices will sustain themselves. But if home prices continue to skyrocket, I'll be doing the following things.
1. Putting my plans to buy a vacation home on hold
My husband and I had a goal of buying a vacation home to serve partially as a property to use ourselves and partially as an income property. And at this point, we've saved nicely for a down payment on one. But with home prices being so high, we won't be making any offers on a vacation home anytime soon.
Home prices in our target area for a vacation property are up across the board, but there's virtually no inventory to choose from. That means we're apt to get stuck not only paying a premium but also having to settle. Neither is worth it to us.
2. Staying put in my current home
Even though my home is not on the market, I've had real estate agents reach out to me and make me an offer. And the last one I got was quite generous.
Still, I won't be selling my house anytime soon for one big reason -- I have nowhere to go. Even if I were to score a massive profit, what I'd gain from my sale, I'd simply pay for a replacement home. Plus, I'd then have to absorb the cost of moving. That doesn't make sense.
3. Assessing my home equity
Right now, I don't happen to have any borrowing needs. But if home prices continue to soar, I might do a quick assessment to see what options I have for borrowing against my home equity, just in case.
Right now, homeowners are actually sitting on record levels of equity. And while borrowing rates have gotten more expensive, those needing money for improvements, repairs, or other purposes could consider tapping their home equity while it's up.
When will buyers get relief?
Unfortunately, it could be a while before home prices drop to more moderate levels. That means a lot of buyers could continue to struggle to purchase property, especially in light of higher mortgage rates.
If housing inventory picks up in the course of the year, that could help bring home prices down. But for now, home prices are way up, so I certainly won't be making any plans to buy or sell anytime soon.