Bond yields, mortgage, disposable income data, etc. All too obscure? The real estate market too often seems unpredictable, while selling and buying houses resembles a game of Russian roulette. Lives, fortunes, livelihoods are at stake, and we repeatedly find ourselves at a loss. Real estate agents, realtors provide buyers and sellers with much-needed assistance and a clear vision in this labyrinth of over-complicated terminology and times of economic unpredictability.
In the upcoming article, we will see that the cheapest is not necessarily the best, while the more expensive might be worth the investment.
Components and ingredients to the bigger picture
First and foremost the price of real estate is determined by the economic condition/development of the area it is located in, and, the amount of investment that is required to turn it into a livable home. Let’s have a more detailed look at the factors conditioning the financial value of a house that are characteristic worldwide:
- Analysis of the direct environment of the real estate in question
- The sale prices of homes of similar size in your area that were sold recently give a reasonably accurate estimate.
- The geographical location and immediate neighborhood of the property
- Dimension and accessible space
- Period of existence and condition
- How often has your house been refurbished and improved
- The local market (supply and demand)
- Monthly economic indicators observing the economy and real estate markets.
They involve market rates, bond yields, disposable income data, housing data, unemployment rates, etc.
- Interest and mortgage rates
- Population and demographics
- Aesthetics/Curb Appeal
In a larger context, when considering the factors that influence the residential and commercial real estate market, there are four that are worth mentioning: government policies, socio-economic factors, demographics, and technology.
And let’s not forget about the SWOT Analysis with its four factors: strengths, weaknesses, opportunities, and threats, when one decides to purchase a house.
Why and when do the prices of real estate skyrocket in the US?
According to SFGate, house prices soar under favorable economic and political conditions. Unfortunately, aspects affecting real estate prices are not sealed from fluctuation, do not exist in a bubble, and keep on influencing each other. If you intend to sell your house, the current supply in the housing market, and the demand for houses will also affect your chances.
Once there are more buyers than sellers, logically, the number of houses on the market decreases, and the requests escalate. Consequently, you find available houses more complex and at a higher price. Instead of paying for real estate in cash, upfront, purchasers rely on mortgages from banks. Pending on the willingness of the aforementioned financial institution to lend money to buyers, sellers will always ask a bit more above what they expect to sell their homes for in order to give wiggle room during negotiation.
sellers will always keep the value of houses sky-high, because they hope the bank will locate the highest amount of credit for buyers, and it can leave room for negotiation. Banks in the US take into consideration unemployment statistics too: unemployment goes down, prices go up. Job security spurs workers to take on more mortgage debt. In dire straits, when more people lose their jobs, the economy becomes unstable, and banks will not allow so many mortgages, or, at least, not so easily. Fewer purchase real estates, hence prices go down.
- Low interest rates motivate buyers to purchase new houses, even at a higher price.
- Area desirability is an anomaly in a micro-climate. Let’ suppose housing prices fall nationwide, in certain regions, however, exactly the opposite happens. The explanation for this phenomenon is that promising job opportunities have occurred making the area desirable to move to.
- The political climate setting tariffs on foreign building materials and tax laws also have a powerful impact in establishing housing prices. Mortgage interest deduction on the buyers’ taxes can be an incentive for house acquisition.
The cheapest states to buy a house in 2021
In the previous year, low interest rates turned the housing market into a seller’s market, in other words, it triggered the sellers’ market, characterized by more demand than supply. Now, let’s have a look at the most affordable real estate in various US states in 2021 with the national pandemic and all its consequences in mind. As you will see the first five states rely heavily on agriculture, manufacturing, and natural resources. Huge industrial regions are not present here, nor do they have large metropolitan areas.
Top five states to buy affordable real estates
1.West Virginia
- Median home value: $113,000 (according to Zillow)
- 1-year price change: +4%
- 5-year price change: +17%
- Median rent: $1,100 (according to HomeSnacks)
- Cheapest cities to buy a house: Bluefield, Clarksburg, Beckley, Huntington (according to Yahoo)
- Cost of living index: 91
- 2.Mississippi
- Median home value: $134,000
- 1-year price change: +5%
- 5-year price change: +20.0%
- Median rent: $1,200
- Cheapest cities to buy a house: Jackson, Greenville, Meridian, Gulfport
- Cost of living index: 86
- 3.Oklahoma
- Median home value: $141,000
- 1-year price change: +7%
- 5-year price change: +24%
- Median rent: $1,095
- Cheapest cities to buy a house: Muskogee, Lawton, Shawnee, Enid
- Cost of living index: 87
- 4.Arkansas
- Median home value: $141,000
- 1-year price change: +6%
- 5-year price change: +25%
- Median rent: $995
- Cheapest cities to buy a house: Pine Bluff, Texarkana, North Little Rock, Fort Smith
- Cost of living index: 87
- 5.Alabama
- Median home value: $158,000
- 1-year price change: +9%
- 5-year price change: +29%
- Median rent: $1,050
- Cheapest cities to buy a house: Gadsden, Birmingham, Montgomery, Phenix City
- Cost of living index: 90
The 30% rule
Many realtors and real estate agents will recommend you to use the 30% rule to judge whether you spend too much on housing. If you spend more than 30% of your income on monthly housing costs, you can be labeled as “cost-burdened.” According to the Census, U.S. homeowners, with a mortgage, spend around $1,600 each month on housing costs. Consequently, on average, households try to avoid becoming cost-burdened and do not spend more than one-third of their income on housing costs.
We advise you to take the area-specific cost of living into consideration, especially before deciding to move to a state.
The essence is to figure out the average real estate costs and cost of living in one particular neighborhood. Based on these you can start planning your future budget. One platform to provide you with expert clues, where you can find answers for questions regarding the cost of living, home prices and many more is RealEstateAgent.com.
Characteristic features in housing trends in 2021: concluding notes on what to expect
So far, not enough houses were available for sale over the year to meet buyers’ demands. House-hunting has just turned out to be more intense since best buys are snatched quickly from the market. Real estate agents sold most homes 20 days faster than the previous year. We can advise you to start your search and get pre-approved for mortgages as soon as possible. For this reason, housing prices are on the rise. In other words, house prices increased by approximately 20%. The other side of the coin is those home sellers can now feel really confident about receiving a considerable profit.
Let’s get hooked together on the new trends in the housing market in 2021!
If you enjoyed this article, give it a big thumbs up and share it with your friends on your social media profile!
