If you’ve thought about buying a house, a car or other big purchase over the past couple years, then you’ve probably run into high prices, steep rates, low inventory…or a combination of all three.
Here’s a look at some of the current factors that are impacting prices and availability:
Big Purchase to Wait on: The Housing Market
The housing market has been hit with a triple whammy that is making home shopping particularly difficult right now.
First, prices are still very high – and after falling steadily for seven months, they’ve now risen consistently for the past seven months in a row.
Second, rates are not ideal for buyers. Mortgage rates in October were hovering just above 8 percent, and likely won’t go down anytime soon. The Federal Reserve continues to raise rates in an effort to bring down the inflation rate to 2 percent. The rate of inflation currently at 3.7 percent, so you can expect rates to remain high for a bit longer.
And finally, inventory is still lower than usual. Typically, the real estate market should have about a six month supply of homes on the market. That number fell to 1.6 months in January of 2022, and has since bumped up to 3.3 months in August of 2023. So while things are improving, there are still less houses on the market than there should be in a healthy market.
All that being said, this isn’t a great time to buy a house. But if you do have to move right now, try to put as much down as possible because it reduces how much is financed at the current high rate. Additionally, keep an eye on your budget and consider refinancing when rates fall again.
If you’re fixing up your current house instead of moving, you still might run into some challenges. The cost of materials rose about 3 percent this year, according to labor data. And thanks to a skilled workers shortage, general contractors are charging more.
The lack of workers (about 500,000 too few, according to the ABC) means that projects are taking far longer to complete than usual.
So again, if your renovations aren’t completely necessary, you might want to hold off until 2024 to see if those factors improve. Alternatively, you could look into more affordable options to help upgrade your home, like:
- Getting creative with materials you already have
- Painting or refinishing cabinets instead of installing brand new ones
- Shopping at builder’s surplus stores for floors, countertops, etc.
- Choosing alternative options that are more affordable but have a similar look, i.e. laminate instead of hardwood floors, or quartz countertops instead of marble
Buying a New or Used Car
Car prices are following the same trend as houses: lower than a year or two ago, but still high. And that goes for both new and used cars.
Holding onto your current vehicle a bit longer might be your best bet right now, but sometimes buying a new car is unavoidable.
If you are in the market for a new car, make sure you shop around before committing. Comparison shopping will be really important, and give you a better idea of realistic prices right now.
You should also do the math to make sure you have a clear idea of what you can afford. Remember that car loan rates are still high right now. You may be able to refinance when rates come down, but until then, you’ll be paying more in interest.
The bottom line
As inflation falls and prices come down, major purchases like cars and houses tend to lag behind other smaller investments. Appliances, for example, have seen a price decrease of 10 percent since 2022. And most economists surveyed do anticipate that the Fed will start to cut the federal funds rate in 2024, which should slowly ease interest rates.
Until then, just be mindful of your budget and what you can truly afford, and try to hold off on major purchases if you’re able. Prices and inventory might be more favorable in 2024.
About Your Richest Life
At Your Richest Life, physician-focused financial planner Katie Brewer, CFP®, wants to help you build a successful financial future. For more information on the services offered, contact Katie today.