Homeownership is part of the American Dream. Whether you like a peaceful rural setting or a bustling metropolis, you likely want a place to call your own. It’s a fine aspiration, but right now, home prices are skyrocketing.
Even a worldwide pandemic hasn’t slowed the real estate market. In June 2020, the average price of a U.S. home was $374,500. At the end of 2021, a mere 18 months later, that price rose to $477,900. This is an average rise of over $100,000 in less than 2 years.
Why Are the Prices of Homes Rising?
It seems that demand for houses is increasing, causing a market rise in the value of homes. People are buying houses for far more than they are worth, creating a bubble in the market.
Supply and demand are also affecting the market. Because of the pandemic, fewer people have been willing to sell and move. This has created something of a shortage in the market, increasing demand and prices.
The Problems of Escalating Real Estate Costs
In a “seller’s market” like this one, selling a home can be a great benefit. However, buying a home right now can cause many woes tomorrow.
Most obviously, if you’re buying a home right now, you’re likely paying too much. People who bought in 2020 are making mortgage payments of about $2095 per month. That same home, aged by less than two years, would cost $2,669 a month if you bought it today. You could potentially be locked into that steep payment for the next thirty years.
Higher Property Taxes
The more you pay for your house, the more you will owe in property taxes. These taxes are usually locked in permanently, despite the fluctuating value of a home. In Wisconsin, residents who bought in 2020 are paying around $7,415 in annual property taxes. For a home purchased today, that number is closer to $9,642 per year.
Buying Now Could Cause Future Problems
Anyone with an education in economics knows that bubbles always burst. Evidence suggests that the current housing market is one such bubble, so a crash could happen any day.
If you buy now, your home’s value could plummet later. This leaves you spending more on the loan than on the actual price of the home. Houses generally appreciate over time, but this does not happen when a market bursts. Typically, the price of everything drops, leaving you completely upside down on your loan.
If you want to sell after housing prices drop, you may not get enough to cover your debt. You can use every penny of the sale on your loan and still owe your lender thousands of dollars. For instance, the national median of homes in 2005 was $301,000. Over the next 15 years, that median dropped before the current boom. If you bought and sold a home between 2005 and 2020, you probably lost money. The same could happen to people buying at the current prices.
Turn to Us for Assistance
Don't get caught up in the craze. If you're experiencing housing trouble of any kind, contact our firm for help. Whether you're at risk of foreclosure, or you’ve experienced problems with a home purchase, we are there for you.
For a free consultation, call us today at (608) 420-4033 or contact us online.