Whether you’re a life-long renter, first time home buyer, or have been through the home purchase process before, the housing market can still be very confusing.
After all, there are many variables that work together to determine whether it’s a good time for you to buy or sell. And the headlines you read may not always be helpful to you when making your decision!
Let’s take a look at how the different housing market elements affect each other to determine your overall buying power.
What are the Different Pieces of the Housing Market?
First, it’s important to define some of the terms that we’ll be using today. You probably have heard these phrases used before, and may even have a general idea of what they mean, but it’s important to review. Remember, all of these elements work together!
The total number of unsold housing units in a specific “stock.” Housing inventory is dependent on your geographic location, so it’s important to know your local market. If there are a larger than normal number of listings on the market, this is considered a buyer’s market. A seller’s market occurs if there are less listings than average for sale.
Housing prices are exactly what they sound like–how much it will cost you to purchase a home in a given housing market.
Mortgage Interest Rates
A mortgage interest rate determines how much interest you will pay on your home loan. Mortgage rates are also affected by many different factors, including the Federal Reserve Rate. If you want to learn more about how the Fed Rate and mortgage interest rates work together, check out this article.
If you are already a homeowner and considering selling, homeowner equity is an important consideration. This is the overall value of your home, which is calculated by looking at the property’s market value, as well as any outstanding debt connected to the property.
If you’re looking at buying a home, homeowner tenure will also play a role. Homeowner tenure is, simply put, the reason that you live where you currently do. Whether that means paying rent, making mortgage payments, or owning a property outright, your homeowner tenure will help determine your overall financing options.
Finally, housing affordability is the result of all of these variables working together. This will be the ultimate deciding factor of which home you can afford, and whether it’s a good or a bad time to buy or sell.
How Do These Elements Work Together?
Now that we better understand the different housing market elements, you’re probably wondering how exactly they affect one another.
Check out this chart to see for yourself!
How Does the State of the Housing Market Affect You?
As you can see, these variables are connected in many ways, which makes it difficult to answer the question of: “Is the housing market good right now?” This is because all housing markets can be good or bad for you, depending on your current goals and situation.
It’s important to sit down with an expert in your local housing market to fully understand the best option for you and your family.
All of these housing market variables should play a role in your home buying or selling decisions. But, you don’t need to make these decisions alone! The pros can help you analyze the current market, your unique financial situation, and, most importantly, your goals, to find a solution that best fits your needs.