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BUYER BEWARE

Three things to consider before buying a home in 2022 – from rising interest costs to future house price drops

AFTER a wild two years, the housing market is finally starting to cool.

During the pandemic, home prices skyrocketed to levels the market had never seen as some buyers were forced to pay above ask due to such high demand.

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The housing market has seen record highs over the past two yearsCredit: Getty

Experts say that higher interest rates, property shortages, and materials shortages are just a few reasons for the lower demand.

As the Federal Reserve will most likely keep raising rates to curb inflation, homebuyers will face higher prices despite low demand.

Because purchasing a home is one of the biggest investments people can make, buyers should properly prepare for it.

There are many factors that homebuyers should consider before making such a large purchase.

Below are just three of the top factors to consider before buying.

1. Mortgage rates

Higher prices aren't the only things homebuyers are facing, they are also dealing with increasing mortgage rates.

Research shows that rates are two percentage points higher than they were just one year ago.

Even though fluctuating rates are typical, many experts predict they will continue to rise this year.

Farnoosh Torabi, personal finance expert and editor-at-large at CNET said in an article, "depending on the market you're shopping in, home prices may not be cooling as fast as interest rates are rising."

"That may mean that the longer you wait to buy this year, the bigger your monthly payment could be," Mr Torabi added.

2. Financials

Since buyers are making such a huge potential purchase, financial security, as well as job security, is imperative.

At the beginning of 2022, 81% of homebuyers couldn't afford half the homes for sale in their markets, economists from the National Association of Homebuilders reported.

So potential buyers must be prepared.

Patrick Duffy, founder and chief economist of MetroIntelligence, told The Sun that preparedness is one of the largest missteps homebuyers make.

"Polls have shown buyers not being prepared for the true cost of homeownership, buying homes they don't like after moving in," he added.

He added that if a big decision is made in haste, it's often followed with regret.

3. Trends and risks

As housing affordability may soon increase as inventory grows, it's important for homebuyers to be aware of risks.

One potential risk could be bidding wars.

After low months of low inventory, June was recorded to have a particularly better month.

According to Realtor.com, inventory for available homes grew by 18.7%.

More availability typically means bidding wars for those looking to stay within their budgets.

Additionally, there have been talks of a recession which could ultimately lead to buyers overpaying as homes may not be worth as much in the coming years.

The cities where home sellers are dropping prices by up to 33% to attract buyers – can you save cash?

Plus, this couple made three big mistakes when buying their first $328k home.

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