Today, more people are choosing to become homeowners: According to the National Association of Realtors (NAR), existing home sales in April were 9.7% higher than one year ago.

Of course, the decision to buy or sell a home is a highly personal one. Make an informed decision by learning about current housing market conditions and considering your own circumstances.

Housing availability: More demand than supply

The current housing market is competitive in many places. Buyer traffic continues to increase – up 31% compared with a year ago – but housing inventory isn’t keeping pace. In April 2013 the number of available homes was down 14% from the previous year.

As a buyer, you might find more opportunity in the new-home market. Low inventory numbers and increasing demand have led to the highest levels of home building in more than four years.

Home prices: Increasing for now

Homeowners looking to sell might have good news, however. The national median existing-home price for all housing types in April was $192,800, up 11% from a year ago. What’s more, we’ve seen consistent year-over-year price increases, as well as increases during consecutive months.

The pace of price increases could slow in future months due to a variety of factors, including rising interest rates and an increase in housing supply.

Mortgage lending: Rising interest rates

Higher interest rates and fees can affect your real estate purchasing power if you’ll need to finance your home. Some economists predict that mortgage rates could increase from 4.13% toward the end of 2013 to more than 5% in 2014 and possibly to 5.3% in 2015. Rising rates are influenced by a number of economic factors, including increased fees to banks and lenders that sell loans to Fannie Mae and Freddie Mac.

Additionally, if you’re considering a Federal Housing Administration (FHA) loan and your down payment will be less than 20% of the purchase price, you should expect to pay more in mortgage insurance premiums. The FHA increased these premiums earlier this year. In many instances, you may find FHA to be a more expensive financing option that should be considered after thoroughly evaluating all other product options that meet your credit qualifying and financial needs.

Mortgage lending standards today are slightly less restricted than they were in 2007. But looking ahead, lending standards might become tougher for some. Beginning January 10, 2014, a new ruling issued by the Consumer Financial Protection Bureau requires that a borrower’s total payment for all monthly debt cannot exceed 43% of their gross income.

A personal decision

Your decision to buy or sell a home shouldn’t be based only on the state of the current  housing market. It’s important to consider personal factors, including:

  • Your ability to afford the financial responsibilities of homeownership ― including mortgage payments, insurance costs, property taxes, and home maintenance expenses
  • Your likelihood of remaining in the same area for many years to come
  • Your housing needs versus your housing wants

Thinking long term, and knowing where you stand financially and emotionally, can help guide your housing decisions.

Empower yourself with financial knowledge

We’re committed to helping you as you work toward financial success. Here you’ll find a wide range of helpful information, interactive tools, practical strategies, and more — all designed to increase your financial literacy and help you reach your financial goals.

My Financial Guide >

Products to Consider: