The inventory of Boston area homes for sale continues to feature prices that have grown over the past year. According to the S&P CoreLogic Case-Shiller U.S. National HomePrice NSA Index, home prices increased 5% between May 2015 and May 2016. The growth in home values during that period and beyond prompted The Wall Street Journal to declare the increase as “further proof that the U.S. housing market had its strongest spring since the recession.” With that as our focus, here are five opportunities that higher prices may offer.
Higher Priced Boston Area Homes for Sale Offer Options
Option #1 – Become a homeowner. If you’re in the market for a home, you may be pleased to know that the price growth seems to have slowed somewhat. While prices aren’t expected to drop, they have nonetheless leveled off for now. Stiff competition in markets with low inventory is expected to ease slightly as more homeowners will sell to take advantage of the higher prices. Zillow forecasts that home prices will continue to rise, just not as sharply as in the past year. Zillow predicts prices to rise around 3% or less in the next year.
With interest rates still at near-record lows, it could be a great time to buy the right house. However, economists issue these words of caution. Be careful taking on debt – especially mortgage debt. Many economists predict the U.S. could have another recession in the not-too-distant future. In addition, you could lose your job, become injured or temporarily be unable to work. They suggest following these guidelines:
• Keep your housing costs between 30-35% of your gross monthly income
• Don’t get overextended or use credit cards for purchases
• Always maintain an emergency fund that would pay a minimum of three months (six months is better) of living expenses
Option #2 – Move up to a better home. As home prices rise, many homeowners are finding they are no longer underwater on their mortgages. When they were underwater, they were unable to sell – contributing both to the lack of inventory and to a slower recovery. Homeowners who are no longer underwater find themselves with a much better opportunity to sell their homes and potentially buy a newer, bigger or better one. As this happens there will no doubt be an increase in the number of Boston area homes for sale in the marketplace.
Option #3 – Take out cash. Many homeowners with median-priced homes have enjoyed equity increases of $10,000-$15,000 or more during the last year as a result of rising home prices. This has prompted millions of homeowners throughout the U.S. to refinance their mortgages or take out a home equity line of credit (HELOC.) Homeowners are tapping into their cash equities for a wide variety of reasons ranging from home improvements to paying for college, or for paying for things like vacations or boat purchases. One suggestion to be mindful of, however, is to leave a good amount of equity untouched when you borrow. That way, if there’s ever another substantial price drop you’ll be assured you won’t suffer a negative equity position and be underwater.
Option #4 – Take the money and run. Some homeowners see the rising home prices as an opportunity to cash out – to take the money and run. In the hottest markets where prices have risen higher than the norm, it represents the proverbial “My ship has come in” scenario to homeowners ready to retire and use that newfound money solely for that purpose. While such an option is rare in the case of most American homeowners with median-priced homes with mortgages, it is still a possibility.
Option #5 – Don’t do anything. Homeowners who are content and don’t really see an advantage in making a move of any kind will continue to enjoy the ride the rising prices are providing. The chances are pretty good that home values will continue to rise – even if at a more gradual pace than we’ve seen in the last year. When that continues, not only will the other options always be available, home equity will continue to grow and it will be accessible when the time comes.
Regardless of what you decide to do with the options available, Boston area homes for sale provide homeowners and purchasers alike opportunities in today’s real estate market. Rising prices create a market that appears to be growing and thriving, making a welcomed and noticeable recovery from less than a decade ago. While there are still inventory challenges with demand exceeding the supply of homes for sale, some analysts are confident the recent price gains will help improve that situation.
In summary, as Americans, we’ve always been told that real estate is a good investment – and, for the most part, that’s still very true. Homes and real estate purchased at the right price and in neighborhoods and markets that are stable or on the rise will likely always be a sound investment over time. As you consider purchasing one of the Boston area homes for sale, enlist the help and advice of a real estate professional. They know the market and the neighborhoods, and they know what the price ranges are for comparable sales of homes you may be interested in. More than anything else, buying a home in a good neighborhood at a fair market price will give you the best opportunity to build equity over time. Overpaying simply is not – and shouldn’t be – an option. We know of no bigger “dream-killer” than paying more for a property than it’s worth, and then being disappointed because you can’t sell it for what you need at a later date.
See more articles pertaining to Boston area homes for sale in the two sections of articles on Boston Real Estate and Boston Homes for Sale just below Boston Real Estate Categories in the column to your right.