Are Home Prices Going Up?
Buying a house is a major decision, and it comes with the largest financial commitment of your life. If you think student loans are bad, consider that a mortgage is usually at least $100,000 more than a private university in the United States! While that may sound intimidating, there are two realities that you simply need to face: everyone needs a place to live, and buying a house is much more cost-effective in the long run than paying rent to a landlord and gaining no equity in the process.
There are many benefits of homeownership, and an entire post could be written about them. However, this post is going to look at one particular benefit, which is the equity that you hold in your house.
What is Equity?
Equity more or less refers to the idea that you own your house instead of paying to live in someone else’s property. As you make your mortgage payments, you slowly earn more equity – or ownership – of your house. This is on a sliding scale, but each payment at the beginning of the mortgage may earn you .1% more ownership of your house, and in the end each payment might earn you a full percentage of ownership in the house. At the end of the mortgage, whether it is for ten year, twenty years, or thirty years, you will have 100% ownership of your house, which is 100% equity. In perspective, when you rent a house or an apartment, you do not gain any equity in the place at all – you simply pay for the right to use the space as your own.
We have mentioned before that buying a house can be seen as an investment in many ways, and one major aspect of investments is that they earn you returns. In theory, your house should gain value over the span of time that you own it. The value that it gains can vary widely based on the type of home and the location, but it is not unheard of for someone’s home value to double over the life of the mortgage. So, the idea of home prices going up and making a gain on the sale of your house sounds nice, but is it actually happening?
Home Prices are Skyrocketing in Most Parts of the United States
In the beginning of 2020, the average selling price of a home in the United States was $329,000. That number rose to above $408,000 at the end of 2021. In the course of just two full years, that is an increase of $79,000, which is 24%. To see that kind of a return in just two years is mind boggling, but it is not a very accurate representation. That number equates to about 12% per year, which is not a true representation of what is supposed to happen. Still, homeowners should expect to see a gain of between 3% and 4% in the value of their home each year, which is usually squarely ahead of inflation rates. In theory, a house bought for $500,000 today could be worth over $1,000,000 in twenty years.
Is Now a Good Time to Buy a House?
If you need a place to live, it is always a good time to buy a house. You need a roof over your head, after all! However, we do not advise buying a house simply to watch its value go up. Any investment is risky, and it is always best to look first at covering your own needs before seeking financial gain. After all, houses cost hundreds of thousands of dollars, and lumping all of that investment into one place without actually having a need for the house may not be the best investment strategy. If you need a place to live, though, it is a whole different story! The money that you spend on renting a house or apartment earns you no equity, as we mentioned earlier, and using that same about of money (and maybe some more) to buy a house makes a world more sense than renting.
It is worth noting that while the economy has been weird in recent years due largely to the COVID-19 pandemic, house prices have risen steadily. The housing market has been in some ways unfazed by all of the economic hurdles that the pandemic has caused, and home prices haven’t dipped at all on a national level. Building a house is more complicated than ever right now thanks to supply chain shortages, which have jolted existing home values to nudge even higher as the overall supply stays lower than anticipated. This is a good time to buy a home for many reasons, but it may be an even better time to sell a home!
Thank you for reading our blog, Catch the Wave. Hopefully this post helped you to understand what is going on with home prices around the country and whether or not now is a good time to buy or sell a home. Again, property values fluctuate a lot, and we do not ever advise buying a home just for the sake of watching its value increase. However, if you need a place to live (which most people do) buying a home can be a much wiser financial decision than renting one!
If you visit Myrtle Beach or any other place in South Carolina and fall in love, reach out to us for help. We at The Boyd Team are always here to help you figure out whether Myrtle Beach is your next home or not, and we are committed to helping you find the right property for your needs and dreams. Any question that you have about moving to the area and finding your dream home by the beach is our pleasure to answer. Feel free to send us an email at eddie@boydteam.com or text or call us at (843) 222-8566, and we will get back to you as soon as we can. Being true natives of the Grand Strand and Horry County and with over 25 years of experience in the local real estate market, whether buying or selling, we can help you make your dreams a reality.
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Written by Greg
