Throughout the pandemic, we regularly reported on how real estate morphed into a seller’s market. Due to limited inventory and a number of other factors, prices skyrocketed and often led to bidding wars among interested buyers. It’s been a great environment for sellers but a nightmarish one for buyers. And while the market has shown signs of stabilizing and coming back down to Earth in recent weeks and months, higher prices is something that we should all prepare to get used to for the long haul.
In fact, by 2030, many predict that the median home price could climb to about $382,000. These estimates come under the assumption that housing prices would increase by nearly 50 percent in 10 years – which puts the market at a similar pace to how they’ve grown in the past. For what it’s worth, median home prices are expected to come in around $330,000 or perhaps $340,000 in 2021. The bottom line is that prospective home buyers have to be prepared to budget accordingly if they’re in the market, and there are a variety of factors as to why an increase of this magnitude is likely:
- Home prices are somewhat on par with wage increases, and Americans are earning more. In fact, from 1996 to 2019, the average wage increased from about $25,000 to about $52,000 per year.
- Quality homes are still going for more than asking price today. Keep in mind that the median price of a home isn’t often reflective of what the home is valued at, but what it sells at.
- Supply and demand ebbs and flows.
- Interest rates.
So if you’re in the market for a home today or expect to be in the market for a home years from now, you might be wondering what steps you can take to ensure you’re able to afford it. Here’s how you can prepare for higher home prices:
- Start saving early. It may seem overly obvious, but the sooner you start, the more you’ll have in the long term to put toward a down payment.
- Consider investing in Index Funds, which have an average return rate of about 10 percent per year. This is a great option to explore if you’re not planning to purchase a home immediately and want to ensure your savings can work harder for you in the market.
- Explore investing programs, like Acorns and Wealthfront. These programs can help give you a general idea of whether or not you’re on the right track when it comes to meeting your financial goals. They can also help you anticipate any market ebbs and flows that may be on the horizon.
House prices are going up – and expected to climb even higher. Make sure that you’re prepared if you expect to be in the market for a new home.
