Home prices continue to rise. When will they come off?
It’s no secret that home values have gone up a lot this year. But you might be surprised how far they jump.
In September, home prices rose 19.5% from a year earlier, according to the S&P CoreLogic Case-Shiller NSA National Home Price Index. And in some urban areas, this growth was even greater:
Now, they say what goes up must go down, and while this may have initially been applied to the laws of physics, it is easy to say that it applies to home prices as well. The question is: When will prices start to drop so dramatically that buyers can buy homes without busting their budgets?
It’s all about stock
The reason housing prices have risen over the past year has a lot to do with limited inventory. Sellers are reluctant to list their homes due to economic and pandemic concerns. Meanwhile, mortgage rates have stabilized at attractive levels since 2020. This has prompted many buyers to purchase homes this year, despite limited inventory and rising prices.
Once more inventory reaches the real estate market, we should see home values begin to fall. But it is unclear when that might happen.
While the economy has improved a lot since the beginning of the year and unemployment is declining, things are not looking rosy now with regard to COVID-19 cases. Keep in mind that the winter months tend to be slow for new property listings, and we may not be looking forward to a significant increase in housing stock during the first quarter of 2022.
Things could change in the second quarter of the new year, especially if the outbreak wanes and the economy continues to strengthen. But this is not guaranteed.
Now, the good news is that home prices should eventually start to fall – if not in 2022, maybe in 2023. But a lot of potential buyers don’t want to wait that long, nor do they want to risk losing mortgage rates. Affordable available today.
Today’s home buyers are in a very awkward position due to the above circumstances. Those who choose to wait for things to happen may benefit from the wide range of available and affordable homes. These benefits may more than offset higher mortgage rates, if they do rise.
Despite this, mortgage rates are not likely to jump significantly in the near term. And if the home inventory ends up increasing in 2022, that could allow more buyers to meet their home ownership goals. So, if you’re eager to buy in the new year, you may want to work on increasing your credit and save up for a higher down payment over the next few months as this can help open up more options for getting a mortgage.