If you’re like many first-time home buyers in the United States, you’re probably worried about what inflation means for you. How do you know how this will affect the purchase of a new home? It doesn’t really help morale when you hear the latest statistics about inflation. In April 2022, inflation accelerated by 8.3% more than in April 2021, keeping inflation near 40-year highs!
In today’s blog, we will go over what inflation means for you, so you can better understand this concept, and move on with finding your first home. Let’s get started!
Inflation, in Plain Terms
Let’s first go over what inflation is. Inflation is the process in which prices increase over time. In other words, your money right now is worth less than when you first possessed it.
As consumers, we don’t like to witness inflation, but if you look at the big picture, some inflation can be a good thing. A healthy economy should always have some inflation, as rising prices encourage people to buy goods, houses, services, and more, instead of waiting until later. This results in more work that is available for producers, which means they can continue to hire.
Inflation can be good if occurring slowly, and not too quickly. For example, think about your favorite coffee shop, that latte you pay $3.50 for suddenly jumps to $6. That would be a shock, to say the least!
Housing Impact
Inflation impacts housing prices simply because the price of materials used for the construction of homes goes up.
Home appreciation is impacted because homes go through price increases, due to many variables. Such variables include the home’s condition, number of bedrooms/bathrooms, location, and condition.
Home Buying Impact
As a first-time home buyer, you’re curious about what impact inflation could have on you buying your first home. Due to the nature of inflation, the prices of homes will continue to climb for a while. Mortgage interest rates will rise, which means taking out a loan will become more expensive as a higher interest rate leads to higher monthly payments.
What to Do in This Market?
You’re wondering what you should be doing as a first-time home buyer in this housing market. First, it’s s a smart move to pay off any existing debts, in order to have a better DTI (debt-to-income ratio.) This is an important factor a lender will look over when deciding to approve you for a loan. Make sure to avoid opening any new credit card accounts or making any big new purchases, this could harm your credit greatly.
Be Honest With Yourself
As a first-time home buyer, and especially in the current market, your budget won’t be able to fit everything you want in your home. Make a list of what your home absolutely must have and cannot do without.
Talk to your real estate agent about these aspects and don’t forget about fees and any funds you need to be aware of and may need to bring to closing.
Closing Up
This market may be intimidating for first-time buyers, and it may feel like you could be locked out of the market. High rates are combined with high home prices, and affordability is being pushed farther away right before us. If you have the means financially, you may want to start the search now and make a move. Contact our team at 316 Realty Group so we can guide you through the process of buying your first home, we promise you don’t want to do this alone!