Everything is more expensive these days, from a gallon of gas to a gallon of milk, so you’d think that real estate prices are also increasing. Unfortunately, this isn’t the boon for homeowners that you might expect.
While you might be able to sell your home for much more than what you paid — especially if you purchased your property before the interest rate spike post-pandemic and have a fixed-rate loan — unless you are downsizing, you probably won’t be able to find another property for less than that sales price if you are looking in the same area.
According to Realtor.com’s August 2024 Housing Report, “The number of homes actively for sale continues to be elevated compared with last year, growing by 35.8%, a 10th straight month of growth, and now sits at the highest since May 2020… The median price of homes for sale this August decreased by 1.3% compared with last year, at $429,990. However, the median price per square foot grew by 2.3%, indicating that the inventory of smaller and more affordable homes continues to grow in share.” So higher interest rates have made it more expensive to buy each sq. foot of a house which has dampened demand for larger houses. Houses are sitting on the market longer and sellers are cutting prices to compete.
Fortunately, you can weather the storm of inflation by remaining in your current property and continuing to build its value. Here are a few tips for preserving your investment during this unpredictable inflationary period.
Adjustable Mortgage Rates
Adjustable-rate mortgages (ARMs) have their advantages, and you might have opted for an ARM if you planned to sell your property after just a couple of years of ownership. ARMs do offer lower initial rates than a Fixed-rate mortgage and the Fed has indicated that it plans to make meaningful cuts to interest rates, so your ARM could actually decrease in cost over time, meaning more of your monthly payment could go toward your loan’s principle.
As interest rates come down, you should look into different lenders to find one that will allow you to refinance with a fixed-rate mortgage. Locking in a low mortgage rate will allow for stability in your monthly payments, permitting you to build more value in your current property — and helping you keep hold of your household budget as all your other costs rise.
If you already have a fixed-rate mortgage, you should keep a close eye on the behavior of the Federal Reserve when rates come down you might consider refinancing. The rule of thumb is that it generally pays to refinance if you can lock in a rate that is 1% lower than your current rate.
Invest in Regular Maintenance
No matter how jealous you are of the impeccable interior style of the homes you see in Architectural Digest or on Instagram, now is not a good time to launch into a major home renovation. Construction materials are affected by inflation to a remarkable degree, which means any renovation projects completed now are unlikely to provide a good return on investment. Instead, you should put energy into your home as it currently stands.
A dilapidated home is not a valuable home. Regardless of the behavior of the economy, you need to continue investing time, money, and effort into home maintenance. General wisdom suggests paying between 1 and 4% of your home’s value every year to maintain and repair the property. In return, that maintenance will increase the value of your home by around 1% every year.
You might want to create a home maintenance binder that allows you to track what tasks need to get done and when. For example, at least annually, you should check your old water heater for leaks, drain and flush the tank, test the temperature valve, and more. The process should take less than an hour, and these small tasks could save you big by avoiding the expense of a new water heater and keeping your utility bills low.
Some other essential systems in your home that should enjoy regular attention include:
Your basement/crawlspace and attic. Even if you haven’t converted these areas into livable space, you need to venture into them occasionally to check for water damage, look for pests, inspect the insulation, and verify that everything is in good working order.
Your building envelope. The walls and roof of your home protect the entire property from various types of damage. You need to be on the lookout for leaks and cracks around your home’s exterior that could compromise the effectiveness of your envelope.
Your plumbing and appliances. Fixtures in your bathrooms, laundry room, and kitchen should be inspected regularly for signs of wear and tear. Ideally, you should repair any appliances that are not working properly, though that might not be possible with newer models.
Your HVAC. One of the more complex systems in your home also requires some of the most regular maintenance. Generally, this maintenance task is best outsourced to professionals who know better how to manage your HVAC to ensure good working order.
While you are thinking about maintenance, consider how your other investments can benefit from some regular TLC. For instance, if you have any amount of your wealth in cars, you should have an organized maintenance schedule for each vehicle to ensure each is in tip-top shape in case you need or want to make a sale while prices are high. There are many ways a driver can damage a car, so you need to be careful to use it safely.
Some experts predict that inflation rates could return to normal as soon as the last few months of 2024, but even if they do, you might hold off on making any significant financial moves until you can have relative certainty about upcoming economic behavior. By maintaining value in your current investments — like your home and car — you can preserve your wealth in this high-inflation world.
House for sale Image Created by Bing AI.
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