WFCN —
In recent years, many Americans have found the path to homeownership to be rather challenging. For the time being, many would-be purchasers are sitting on their hands due to the confluence of high prices, scarce inventory, inflation, and skyrocketing mortgage rates.
Some homeowners may feel “locked in” by the low mortgage they had a few years ago, making them hesitant to sell their property, even if they may want or need to. This is just one of the unique challenges that homeowners face.
A recent report on Realtor.com did point out, nevertheless, that “patience pays.” Although property values do rise with time, there are several macroeconomic variables that make it hard to predict by how much.
In May, the median home price reached $419,300, marking a 5.8% rise from the previous year. Existing house sales for the month of June reached “the highest price ever recorded and the eleventh consecutive month of year-over-year price gains,” as stated in the National Association of Realtors‘ report.
Patience pays off, and in some parts of the country it can pay you even more, according to a new analysis from Realtor.com. In the next five years, property values in these three states could skyrocket.
The Top Five-Year Returning States
The study confirms what many have suspected: Massachusetts (36% gain), Rhode Island (34% increase), and California (34% surge) are the top three states in terms of average five-year returns.
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The median listing price of a home in May was $442,500, and the average five-year return for properties across the U.S. was 26%, according to data from Realtor.com. And hence, “this same listing could appreciate to about $557,550” in that time frame. In states whose price rises are higher than the national average, however, that appreciation would mean a lot more.
According to Realtor.com’s senior economic analyst Hannah Jones, homebuyers in the Northeast have sought out areas that provide more value for their money and are close to major business hubs because of the steep price increases in these areas over the past five years.
“As buyers seek a balance between city access and more affordable housing, we have seen substantial price growth in Boston-area commuter markets,” Jones said.
At the same time, she brought up the fact that California has witnessed significant price increases due to low inventory, which has further driven up already high costs, particularly in the state’s more inexpensive regions.
Prices have risen due to a shortage of inventory and the fact that “home shoppers set on homeownership have flocked to slightly more affordable areas in California,” she explained.
The “Five-Year Rule of Thumb” in Real Estate
As Jones mentioned, in most cases, a buyer’s exposure to short-term fluctuations in the housing market is reduced the longer they own a house.
If you buy or sell at different times, Jones said, you can see different results due to unanticipated events like the COVID-19 epidemic.
The greatest strategy to protect yourself from losing money on a home sale, according to Jones, is to buy a home that you can afford and plan to keep for at least five to ten years because timing the market is tough. You can take advantage of the variables that are most important to you, such as the speed of sale, price, or number of bids, by comparing your preferred sale time frame with the present market conditions.