Whether you’re in the market for a new house, a car, appliances or furniture, it’s a tricky time to buy.
Inflation is sitting at about 8.26 percent, which is still much higher than the 2 percent the Federal Reserve typically aims for. Inventory is still low across several industries. And there are some indicators that we may be heading for a recession.
The Fed increased interest rates at a rapid rate this year, and that’s leaving buyers a bit shell-shocked. Prices for things like groceries, gas and other basic goods have started to come down a bit, but bigger purchases take longer to respond.
Here is the outlook for some of those big purchases over the next several months:
Big Purchases in 2022: Buying a House
If you’ve shopped in the housing market over the past couple of years, then you know that it has been deeply competitive (and expensive.) Lower inventory contributed to those inflated prices, and houses flew off the market almost as soon as they were listed.
The good news is that housing prices have started to come down. Home prices were up 18 percent in June, and by September, that number had fallen to 14 percent. This trend will likely continue – slowly – in the coming months, and into 2023.
But there’s another hitch for buyers and sellers, and that’s the mortgage rates. 30-year mortgage rates are up quite a bit, now sitting at 6.5 percent. (For reference, mortgage rates hit a recent low of 2.68 percent in December 2020.) And there’s still a chance those rates could increase even further next year.
What does this mean for buyers, and for sellers? It means that the housing market is tough right now, no matter who you are. If you can, you might want to wait it out until next year. Keep an eye on home prices and interest rates, and try again when the market is a little more favorable.
If you can’t wait, you might be able to buy now and refinance later when rates come down. Pay very close attention to what you can afford, and make sure you’re clear on exactly how much you’ll pay per month at different price points.
Buying a Car
Buying a car continues to be costly in 2022. According to Kelly Blue Book, the cost of a new car increased 11 percent this year, and will likely continue to stay elevated for awhile.
Like the housing market, that cost increase comes from a combination of high interest rates, record inflation levels, and low inventory. Here, too, it makes sense to wait if you can.
It’s tough to say exactly when car prices will become more manageable, so if you’re not in a rush, keep an eye on prices in 2023.
If you do need to buy a car this year, arm yourself with research before you buy. Know the going rate for the car you want, and what other similar cars have sold for in your area. That will give you more leverage when you’re negotiating at a dealership.
Also, know exactly what you can afford before you shop. Rates are higher than usual, and if you’re guessing at the price you can afford, you might be surprised with a pricier monthly bill than you were expecting.
Finally, shop for a used car if you can. Used car prices are coming down faster than new cars, and you might even be able to find your dream car (with a dream price tag.)
Furniture and Appliances
Buying furniture or appliances for the past couple of years has been a slow, expensive process. During the pandemic, supply chain snags led to major delays for stores and consumers.
The good news is that the supply is in a much better place now, just in time for holiday deals. The bad news is that inflation has led to some serious price increases, and even Black Friday deals won’t offer much relief.
That being said, if you do have to buy a new appliance or large piece of furniture, shopping the holiday deals is a great strategy. You could also wait until manufacturers release new models, because that typically means they’re going to discount the older ones. Keep an eye on the models you’re considering and watch for price drops.
Keep an eye on spending for big purchases
Whatever you’re buying, the best thing you can do is dig into your finances and make sure you know what you can afford. The price of just about everything has gone up this year, and your spending might be eating more of your budget than you think.
As long as you approach any major purchase with a clear understanding of current costs and your cash flow, you’ll be able to make a choice that works best for you and your bank account.
Do you need help planning for your financial future? Contact me today to set up a meeting to talk about your goals.