How to Navigate a Costly Real Estate Market

Real estate has long been touted as a worthy investment. Home values historically appreciate over time, making real estate a desirable investment opportunity and one that simultaneously fulfills an investor's need for a place to live. That sounds like a win-win for those with the means of purchasing a home. But in recent years, many people have found themselves priced out of the real estate market due to a number of variables beyond their control.

It's no secret that home prices have been on the rise in recent years. According to the National Association of Realtors, the median sale price for a home in the United States reached $419,300 in May 2024. Such high prices, coupled with decreasing yet still high interest rates, has made homeownership as expensive as ever and left many aspiring home buyers to wonder what they can do as they seek to buy a property to call their own. Though there's no foolproof way to navigate the current real estate market to a satisfying end, the following are some strategies buyers can consider as they begin searching for a home.

• Be patient. Patience is a virtue prospective home buyers will need to embrace. The NAR reported a 3.7-month supply of housing inventory in May, which is low and suggestive of a seller's market. Buyers confronting a low inventory market must remain patient if they hope to find a house that checks all their boxes. Such a house may not be on the current market, and might not be for some time. But forecasters predict the interest rate reduction announced by the Federal Reserve in September will lead to a higher inventory, even if real estate sales tend to be lower in winter than spring and summer. As indicators like lower interest rates gradually point to a higher inventory, buyers may benefit by remaining patient.

• Be ready to pounce. Of course, a market characterized by limited inventory is typically competitive, and the real estate market in recent years has certainly played out that way. Real estate markets can vary considerably, even within the same country, but an analysis from the New Jersey Real Estate Network indicated the average time homes in the Garden State were on the market decreased from 39 days in 2023 to 35 days in 2024. Patience is important when buying a home, as buyers don't want to act too fast and then end up living in a home they don't like. But it's equally important that buyers be ready to pounce if they see a property they like. Limited inventory means sellers are likely to receive multiple offers, and hesitancy on the part of buyers could prevent them from finding a new home.

• Line up your finances. Mortgage preapproval and a solid nest egg have long been vital when buying a home, and that remains true in the current market. The competitive nature of the current market might make mortgage preapproval more important than ever. A preapproval indicates to sellers that a buyer has already arranged financing and been approved to purchase a home for the amount of their offer. Buyers without a preapproval might be seen as more risky to sellers, some of whom may want to sell their homes as quickly as possible. Sellers in a competitive market may feel they need not wait around for a buyer to be approved, so it's best to line up finances before beginning a home search. Lining up finances includes building a substantial nest egg that demonstrates an ability to make a sizable down payment as part of your offer.