Should I buy a home right now? Here are the 5 things you should know before diving into the bonkers housing market.

plight of pandemic homeowners 4x3
Buyer beware: A number of factors have led to rising home prices, which makes taking the plunge into homeownership even more costly.

  • Low mortgage rates and the remote-work boom fueled home-buying during the pandemic.
  • The frenzy has depleted inventory, sent home prices soaring, and anointed new hot places to live.
  • This guide lays out the facts to know to help decide if you’re ready for homeownership.
  • See more stories on Insider’s business page.

The hottest pandemic purchase is a house.

One report found that 11% of Americans have moved since the start of the coronavirus crisis. Unmoored by remote work and driven by the desire to be near family or enjoy a lower cost of living, buyers have been snapping up primary residences and second homes, fleeing the coastal cities and flooding states such as Texas and Florida, as well as smaller cities, spacious suburbs, and vacation-home spots.

The mass relocations and purchases – coupled with the reluctance of existing homeowners to find a new place to live during a pandemic – have driven the number of homes for sale down to record lows, which in turn has propelled home prices to their highest rates in 15 years.

Intense bidding wars are commonplace. Take one California home that got 122 offers in two days. A May Zillow report found that nearly half the homes for sale in the US are selling in under a week.

Add that up and it’s harder than ever to break into the real-estate market.

Here are five things to understand in order to decide whether you’re ready to take the plunge into homeownership.

1. There’s a striking imbalance of supply and demand

Competition to buy a home is fierce.

There are more people who want to purchase properties than there are homes on the market. (There are even more real-estate agents in the US than there are homes for sale.)

Dwindling housing supply has fostered intense competition marked by bidding wars and all-cash offers.

The tightening housing market is goading prospective buyers into expensive homes that don’t ultimately fit their wants or needs. But for those with cash to spare who are prepared to compromise, now could be a decent time to scoop up a property.

Read more:

Buying a home is a lot harder than it was at the start of the pandemic. Experts say you should wait and avoid buyer’s remorse

April’s red-hot housing market saw nearly half of homes sell in less than a week, Zillow says

It’s actually a horrible time to buy a house

8 signs you’re ready to buy a house

3 reasons why the housing shortage will last for years, Goldman Sachs says

2. Buying a house is expensive even though mortgage rates are still low

Low mortgage rates and the desire for comfortable work-from-home digs have fueled a home-buying frenzy.

The spike in real-estate activity has absolutely depleted housing inventory and ratcheted up housing prices, meaning you could ultimately be overpaying for a property you’d be settling for anyway.

stella guan los angeles buy home regret ibuyer
Stella Guan had buyer’s remorse after beating out other eager bidders for a Southern California house that ended up having toxic mold.

Mortgage rates are still at historic lows, but the high home prices can cancel out the opportunity to get more house for your money and keep monthly payments affordable.

And don’t forget to budget for closing costs and insurance.

Read more:

The average homebuyer now needs to offer above asking price

Investors snatched up $77 billion worth of homes – a record – making it even harder for regular buyers to buy one

Homebuyers are getting slammed by record-high prices. Here’s when economists say they’ll finally ease up.

Most Americans think it’s a good time to buy a house even though they think prices will keep soaring, which shows just how irresistible the dream of homeownership is

Millennials are flocking to fixer-uppers because it’s the only way some can afford a home

3. Building a new home may not be much of an alternative

While existing listings dwindle – in part because homeowners are reluctant to resell their homes out of fear that they may not be able to afford their next one – a possible solution is to buy land and build a new house.

But the raw materials necessary to construct a new property have gotten exorbitantly expensive amid the pandemic. Logistics and shipping issues have resulted in long waits for certain supplies.

There’s also a finite number of contractors and workers to erect such homes. Those workers are in demand, meaning labor costs are also high. Builders nationwide are facing severe delays to complete new builds or even finish renovation projects on fixer-uppers.

Lumber
Lumber prices in the US are skyrocketing, adding tens of thousands of dollars to the cost of building new homes.

The added costs and delays slow down builders, lead to even more expensive home prices, and act as a deterrent to hopeful buyers.

Read more:

The price of lumber is wild right now and it’s a disaster for the already disastrous housing market

More houses will get built soon, Fannie Mae says – but maybe not as much as the market needs

The US is facing a shortage of nearly 4 million homes as builders struggle to meet exploding demand

The cost to build a house depends on the size of your home, but it’s generally more expensive than buying a home

Inside the business of a general contractor in Atlanta, where home renovation prices are in ‘bizarro world’ and backlogs are stretched to 12 weeks

4. Many popular places to live have become even more unaffordable

The pandemic emboldened many Americans – particularly employees who could work remotely – to ditch their big-city apartments and try out the suburbs, rural areas, or different states.

It led to booms in states such as Texas, Florida, Colorado, and North Carolina.

Buying a home in these newly popular areas may result in even more competition. Think higher prices and fewer houses to choose from.

Florida
Miami is one of the Florida hot spots that’s recorded a huge uptick in both buyer interest and property prices.

Read more:

The wealthy invested in ‘hidden gem’ locations during the pandemic, propelling property prices in smaller cities to new heights

Home prices are soaring across the US, but these 11 places are the wildest right now

Big cities are the clear losers of the coronavirus pandemic. Millions of Americans moved away from these 10 urban hubs.

We talked to people in 4 popular beach towns who said this summer is the wildest in years, with barely any houses left to rent and prices through the roof

Elon Musk decries Austin’s housing shortage and sky-high home prices. Peek inside the bonkers real-estate scene in the city Musk predicts will be the country’s ‘biggest boomtown.’

5. Do thorough research before making any offers

Over the past year, some have snatched up houses only to be met with buyer’s remorse, while others have happily profited from their real-estate investments.

House-hunting hopefuls can prepare to buy by establishing an emergency fund, determining how much to budget, and getting preapproved for a mortgage.

Read more:

Why finding a home shouldn’t be your first step toward buying a house

Confessions of pandemic homebuyers: 6 families open up about overpaying, losing bidding wars, and settling for fixer-uppers in a bonkers housing market

I just bought a house in a red-hot market after 5 rejected offers, and I have 6 dos and don’ts for anyone thinking about buying right now

I thought I wanted to buy a ‘dream home’ but had to settle for an ‘OK home’ in this wild market – and I couldn’t be happier about it

Millennials who snapped up homes in the hot real-estate market reveal their biggest regrets, from unexpected costs to high mortgage payments

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