Home prices have risen 25% in just 2 years

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Talk about a massive leap.


Key points

  • The median home listing price in January was $375,000.
  • This represents a 25% increase from January 2020.

Buying a home has been a challenge over the past year for a big reason: There’s not enough inventory for everyone, and that’s sent home prices skyrocketing. In January, the median home listing price was $375,000, reports Realtor.com. This represents an increase of 10.3% compared to the previous January. It’s also a whopping 25% increase in house prices from January 2020.

Not only are house prices rising, but transactions are happening at lightning speed. In January, the typical home was only 61 days on the market. That’s down 10 days from January 2021 and 24 days from January 2020.

If you’re hoping to buy a home in the short term, you may face your share of challenges due to current market conditions. Here’s how to know if home ownership is really within reach.

Run these numbers

As a general rule, it’s a good idea to keep your housing costs at 30% of your take home pay or less. And that 30% shouldn’t just include your mortgage payment. It should also include predictable expenses such as property taxes, home insurance, and HOA fees, if you’re buying a home that comes with them.

To see if you can switch homes given today’s market conditions, you’ll need to use a mortgage calculator to make sure your expenses are within your budget. If they don’t, it’s worth considering waiting.

So let’s say that based on current mortgage rates, the average price of a home in the neighborhood you’re trying to buy in, and the amount of money you have available for a down payment, you’re looking at a monthly payment of 2 $000 for principal and interest on a mortgage. Let’s also assume that you won’t pay any HOA fees, but you will pay an extra $500 per month in property taxes and insurance.

All told, it’s $2,500. That means you’ll need to bring home $8,333 a month to make homeownership affordable for you.

If your take home pay is lower, it means you may need to change your plans. This could mean looking in a different neighborhood, buying a smaller home, or postponing your home-buying plans until prices drop or you’ve accumulated more money to put down.

Will house prices fall in 2022?

One of the main reasons house prices are so inflated is that the real estate market is seriously short of inventory. This gives sellers a supreme advantage.

If more inventory hits the market this year, we could see house prices start to fall. Also, if mortgage rates rise, demand for homes could decline. This, too, could lead to lower house prices – although this does not necessarily make home ownership more affordable for you, because what you gain in one respect (more affordable prices) you will lose in another ( higher interest on a home loan).

All in all, it’s a little early to predict where home prices will go in 2022. But if you’re interested in buying, it’s a good idea to keep an eye on the market so you can seize opportunities. as they arise. It’s also wise to increase your credit score to make yourself as attractive a mortgage candidate as possible. This could allow you to get a competitive interest rate on a home loan, which could help offset the higher price you may have to pay.

A Historic Opportunity to Save Potentially Thousands of Dollars on Your Mortgage

Chances are interest rates won’t stay at multi-decade lows much longer. That’s why it’s crucial to act today, whether you want to refinance and lower your mortgage payments or are ready to pull the trigger on buying a new home.

Ascent’s in-house mortgage expert recommends this company find a low rate – and in fact, he’s used them himself to refi (twice!). Click here to learn more and see your rate. While this does not influence our product opinions, we do receive compensation from partners whose offers appear here. We are by your side, always. See The Ascent’s full announcer disclosure here.

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