As the real estate market shows no signs of slowing down, rising home prices, maybe even record-breaking prices, are inevitable.
According to CoreLogic, a leading real estate researcher, the index for home prices jumped by nearly 20% in a year-over-year analysis.
The numbers are from the beginning of the year and represent the biggest leap in home prices and home appreciation since the 1970s. While CoreLogic itself projects a slowdown to price gains through 2022, there’s a strong possibility that gains will hold at a 10% pace through the end of the year and beyond.
The rate at which home price gains accelerated varied from state to state, as many would expect. The states that experienced the most aggressive price gains are Arizona, Florida, Utah, Nevada and Illinois.
Low inventory of new and existing homes is a factor in the trend. In December and January, consumers entered a market with the lowest inventory levels not seen in a generation. As a result, many buyers submitted written offers well above asking price, which drove prices even further north as inventory remains stagnant.
Could rising interest rates make any noticeable difference in today’s current market dynamics? That’s a big question on the mind of a lot of real estate observers and future homebuyers. The erosion to buyer affordability will be closely watched as interest rates — and the cost for financing a home — trend upward. At the same time, increased rates could slow momentum of home prices.
Geopolitical factors are in the works too. In the opening week of March, interest rates did see a notable decline. But depending on what happens abroad, the drop-off could be an anomaly in what is expected to be a period of continued interest rates hikes moving forward this year.
While the annual appreciation of detached properties jumped by 20%, long-term forecasts peg growth at under 4% by early 2023.
As property values increase, homeowners are presented with an opportunity to act.
Homeowners can gain a number of benefits from a mortgage refinance, especially given their market position. Since home prices have gone up precipitously over the years, homeowners can lean on their growing home equity for additional financial flexibility. A cash-out mortgage refinance lets homeowners borrow money based on how much equity is in their home.
A cash-out refinance lets homeowners finance a home improvement project or pay for a big ticket purchase through their mortgage. Borrowing money through a home refinance is one of the most efficient ways to borrow money with today’s low interest rates.
Homeowners can also save on interest costs through refinancing. They can do away with the old interest rate they have paid on their mortgage and sub it out for a new and improved rate. A new mortgage with a lower rate equals short-term and long-term savings.