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Over the last two years, the rate of home prices appreciated at a dramatic pace. While that led to incredible equity gains for homeowners, it’s also caused some buyers to wonder if home prices will fall. It’s important to know the housing market isn’t a bubble about to burst, and home price growth is supported by strong market fundamentals.
To understand why price declines are unlikely, it’s important to explore what caused home prices to rise so much recently, and where experts say home prices are headed. Here’s what you need to know.
The graph below uses the latest data from CoreLogic to illustrate the rise in home prices over the past year and a half. The gray bars represent the dramatic increase in the rate of home price appreciation in 2021. The blue bars show home prices are still rising in 2022, but not as quickly:
You might be asking: why did home prices climb so much last year? It’s because there were more buyers than there were homes for sale. That imbalance put upward pressure on home prices because demand was extremely high, and supply was record low.
While housing inventory is increasing and buyer demand is softening today, there’s still a shortage of homes available for sale. That’s why the market is seeing ongoing price appreciation. Mark Fleming, Chief Economist at First American, explains it like this:
“. . .we’re still well below normal levels of inventory and that’s why even with the pullback in demand, we still see house prices appreciating. While there is more inventory, it’s still not enough.”
As a result, experts are projecting a more moderate rate of home price appreciation this year, which means home prices will continue rising, but at a slower pace. That doesn’t mean prices are going to fall. As Selma Hepp, Deputy Chief Economist at CoreLogic, says:
“The current home price growth rate is unsustainable, and higher mortgage rates coupled with more inventory will lead to slower home price growth but unlikely declines in home prices.”
In other words, even with higher mortgage rates, moderating buyer demand, and more homes for sale, experts say home price appreciation will slow, but prices won’t decline.
If you’re planning to buy a home, that means you shouldn’t wait for home prices to drop to make your purchase. Instead, buying today means you can get ahead of future price increases, and benefit from the rise in prices in the form of home equity.
Home prices skyrocketed in recent years because there was more demand than supply. As the market shifts, experts aren’t forecasting a drop in prices, just a slowdown in the rate of price growth. To understand what’s happening with home prices in our area, let’s connect today.
While the Federal Reserve is working hard to bring down inflation, the latest data shows the inflation rate is still going up. You no doubt are feeling the pinch on your wallet at the gas pump or the grocery store, but that news may also leave you wondering: should I still buy a home right now?
Greg McBride, Chief Financial Analyst at Bankrate, explains how inflation is affecting the housing market:
“Inflation will have a strong influence on where mortgage rates go in the months ahead. . . . Whenever inflation finally starts to ease, so will mortgage rates — but even then, home prices are still subject to demand and very tight supply.”
No one knows how long it’ll take to bring down inflation, and that means the future trajectory of mortgage rates is also unclear. While that uncertainty isn’t comfortable, here’s why both inflation and mortgage rates are important for you and your homeownership plans.
When you buy a home, the mortgage rate and the price of the home matter. Higher mortgage rates impact how much you’ll pay for your monthly mortgage payment – and that directly affects how much you can comfortably afford. And while there’s no denying it’s more expensive to buy and finance a home this year than it was last year, it doesn’t mean you should pause your search. Here’s why.
In an inflationary economy, prices rise across the board. Historically, homeownership is a great hedge against those rising costs because you can lock in what’s likely your largest monthly payment (your mortgage) for the duration of your loan. That helps stabilize some of your monthly expenses. Not to mention, as home prices continue to appreciate, your home’s value will too. That’s why Mark Cussen, Financial Writer at Investopedia, says:
“Real estate is one of the time-honored inflation hedges. It’s a tangible asset, and those tend to hold their value when inflation reigns, unlike paper assets. More specifically, as prices rise, so do property values.”
Also, no one is calling for homes to lose value. As Selma Hepp, Deputy Chief Economist at CoreLogic, says:
“The current home price growth rate is unsustainable, and higher mortgage rates coupled with more inventory will lead to slower home price growth but unlikely declines in home prices.”
In a nutshell, your home search doesn’t have to go on hold because of rising inflation or higher mortgage rates. There’s more to consider when it comes to why you want to buy a home. In addition to shielding yourself from the impact of inflation and growing your wealth through ongoing price appreciation, there are other reasons to buy a home right now like addressing your changing needs and so much more.
Homeownership is one of the best decisions you can make in an inflationary economy. You get the benefit of the added security of owning your home in a time when experts are forecasting prices to continue to rise.
If you’re planning to buy a home this year, you might have heard that pre-approval is a necessary step to take before starting out on your journey. But why is that? And is it still important in today’s shifting market?
The truth is, getting a pre-approval letter from your lender is critical, and when it comes to your home search, it can be a game changer in so many ways.
To better understand why, it’s important to know what pre-approval is. Freddie Mac defines the process like this:
“A pre-approval is an indication from your lender that they are willing to lend you a certain amount of money to buy your future home. The lender you work with will provide you with a pre-approval letter, which is an official document that states the maximum amount they are willing to lend you, . . .”
Put simply, pre-approval from a lender helps you understand your true price range and how much money you can borrow for your loan. That can make it easier when you set out to search for homes. And since you’ll know what you’re approved for, it’ll also help once it’s time to submit an offer on the home of your dreams.
Another added benefit is that pre-approval lets the seller know you’re qualified to buy their house. Paul Centopani, Editor for the Mortgage Reports, explains:
“. . . most sellers won’t even consider an offer unless the buyer is pre-approved at the right price point. Sellers and their agents want to know you’re ready and able to finance your offer amount. So you’ll want to have your preapproval teed up as soon as you’re serious about bidding on a home you like.”
Every advantage you can gain as a buyer is crucial in a market that’s constantly changing. You’re going to need guidance to navigate these waters, so it’s important to have a team of professionals, such as a real estate advisor and trusted lender, on your side. They’ll help make sure you’re ready to put your best foot forward.
Getting pre-approved for a mortgage helps you better understand what you can borrow and shows sellers you’re serious about purchasing their home. Let’s connect so you have the tools you need to succeed as a homebuyer in today’s shifting market.
If you put a pause on your home search because you weren’t sure where you’d go once you sold your house, it might be a good time to get back into the market. That’s because today’s market is undergoing a shift, and the supply of homes for sale is increasing as a result. That means you may have a better chance of finding a home that will meet your current needs. Here are some options to consider.
According to the National Association of Realtors (NAR), the supply of existing homes (a home that’s been previously owned) has steadily increased since the beginning of the year. The graph below indicates inventory levels are rising, and that’s largely due to more homes coming onto the market and the pace of sales slowing:
As the graph shows, if you’re looking for a home with lived-in charm, supply is rising, and that’s great news for you.
Danielle Hale, Chief Economist for realtor.com, gives insight into why more homeowners are listing their homes and adding to the growing supply of existing homes today:
“Home sellers in many markets across the country continue to benefit from rising home prices and fast-selling homes. That’s prompted a growing number of homeowners to sell homes this year compared to last, giving home shoppers much needed options. We’ve seen more homes come up for sale this year compared to last year . . .”
There are several benefits to buying an existing home. Many buyers want to purchase a home with history, and the character of older houses is hard to reproduce. Existing homes can often be part of an established neighborhood featuring mature landscaping that can give you additional privacy and boost your curb appeal.
Plus, timing can be a consideration as well. With an existing home, you can move in based on the timeline you agree to with the sellers, rather than building a new home and waiting for construction to finish. This is something to keep in mind, especially if you need to move sooner rather than later.
Just remember, while more sellers are listing their homes, supply is still low overall. That means you’ll have more options to choose from as you search for your next home, but you’ll still need to be prepared for a fast-moving market.
Census data shows there’s an increasing number of new homes available for sale. It includes homes that are under construction, soon to be completed, and fully built. As the graph below highlights, the supply of new homes for sale has also grown this year:
When building a new home, you can create your perfect living space and customize it to your lifestyle. That could mean everything from requesting energy efficient options to specific design features. Plus, you’ll have the benefit of all new appliances, windows, roofing, and more. These can all help lower your energy costs, which can add up to significant savings over time.
The lower maintenance that comes with a newer home is another great advantage. When you have a new home, you likely won’t have as many little repairs to tackle, like leaky faucets, shutters to paint, and other odd jobs around the house. And with new construction, you’ll also have warranty options that may cover portions of your investment for the first few years.
Keep in mind, purchasing a new home could mean waiting a considerable amount of time before you can move. Robert Dietz, Chief Economist and Senior Vice President for Economics and Housing Policy at the National Association of Home Builders (NAHB), explains:
“New single-family home inventory remained elevated at a 7.7 months’ supply. . . . However, only 8.3% of new home inventory is completed and ready to occupy. The remaining have not started construction (25.9%) or are currently under construction.”
That’s an important factor when making your decision and one you should discuss with a trusted real estate advisor. They’ll help you think through all the pros and cons of both new and existing homes to help you arrive at your best decision.
With the supply of homes for sale rising, you have options for your next home no matter what your preferences are. If you have questions or want help deciding what’s best for you, let’s connect and start the conversation today.
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With so much talk about an economic slowdown, some people are asking if the housing market is heading for a crash like the one in 2008. To really understand what’s happening with real estate today, it’s important to lean on the experts for reliable information.
Here’s why economists and industry experts say the housing market is not a bubble ready to pop.
The 2008 housing crash is still fresh in the minds of many homebuyers and sellers. But today’s market is different. Odeta Kushi, Deputy Chief Economist at First American, says:
“This is not the same market of 2008. . . . It’s no secret the housing market played a central role in the Great Recession, but this market is just fundamentally different in so many ways.”
Natalie Campisi, Advisor Staff for Forbes, explains how today’s lending standards are different than those during the lead-up to the housing market crash:
“Among the differences between today’s housing market and that of the 2008 housing crash is that lending standards are tighter due to lessons learned and new regulations enacted after the last crisis. Essentially, that means those approved for a mortgage nowadays are less likely to default than those who were approved in the pre-crisis lending period.”
Another reason today’s housing market is nothing like 2008 is that the number of people looking to buy a home still outweighs the supply of homes for sale. As realtor.com notes:
“. . . experts don’t believe the market is in a bubble or a crash is in the cards, like during the Great Recession. The nation is still suffering from a housing shortage that has reached crisis proportions at a time when many millennials are reaching the age when they start to consider homeownership. That’s likely to keep prices high.”
Experts say the housing market isn’t a bubble, and we’re not heading for a crash. Let’s connect so you can have a full picture of today’s housing market in our local area.
If you’ve been thinking about buying a home, you likely have one question on the top of your mind: should I buy right now, or should I wait? While no one can answer that question for you, here’s some information that could help you make your decision.
Each quarter, Pulsenomics surveys a national panel of over 100 economists, real estate experts, and investment and market strategists to compile projections for the future of home price appreciation. The output is the Home Price Expectation Survey. In the latest release, it forecasts home prices will continue appreciating over the next five years (see graph below):
As the graph shows, the rate of appreciation will moderate over the next few years as the market shifts away from the unsustainable pace it saw during the pandemic. After this year, experts project home price appreciation will continue, but at levels that are more typical for the market. As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:
“People should not anticipate another double-digit price appreciation. Those days are over. . . . We may return to more normal price appreciation of 4%, 5% a year.”
For you, that ongoing appreciation should give you peace of mind your investment in homeownership is worthwhile because you’re buying an asset that’s projected to grow in value in the years ahead.
To give you an idea of how this could impact your net worth, here’s how a typical home could grow in value over the next few years using the expert price appreciation projections from the Pulsenomics survey mentioned above (see graph below):
As the graph conveys, even at a more typical pace of appreciation, you still stand to make significant equity gains as your home grows in value. That’s what’s at stake if you delay your plans.
If you’re ready to become a homeowner, know that buying today can set you up for long-term success as your asset’s value (and your own net worth) is projected to grow with the ongoing home price appreciation. Let’s connect to begin your homebuying process today.
The housing market is at a turning point, and if you’re thinking of buying or selling a home, that may leave you wondering: is it still a good time to buy a home? Should I make a move this year? To help answer those questions, let’s turn to the experts for projections on what the second half of the year holds for residential real estate.
While one of the big questions on all buyers’ minds is where will mortgage rates go in the months ahead, no one has a crystal ball to know exactly what’ll happen in the future. What housing market experts know for sure is that the record-low mortgage rates during the pandemic were an outlier, not the norm.
This year, rates have climbed over 2% due to the Federal Reserve’s response to rising inflation. If inflation continues to rise, it’s likely that mortgage rates will respond. Greg McBride, Chief Financial Analyst at Bankrate, explains it well:
“Until inflation peaks, mortgage rates won’t either. Without improvement on the inflation front, we don’t know where the interest rate ceiling will be.”
Whether you’re buying your first home or selling your current house to make a move, today’s mortgage rate is an important factor to consider. When rates rise, they impact affordability and your purchasing power. That’s why it’s crucial to work with a team of professionals, so you have expert advice to help you make an informed decision about your best move.
This year, particularly this spring, the number of homes for sale has grown. That’s partly due to more homeowners listing their houses, but also because higher mortgage rates have helped ease the intensity of buyer demand. Moderating buyer demand slows down the pace of home sales, which in turn helps inventory rise.
Experts say that growth will continue. Recently, realtor.com updated their 2022 inventory forecast. In the latest release, they increased their projections for inventory gains dramatically, going from a 0.3% increase at the beginning of the year to a 15.0% jump by the end of 2022 (see graph below):
More homes to choose from is great news if you’re craving more options for your home search – just know that there isn’t a sudden surplus of inventory on the horizon. Housing supply is still low, so you’ll need to partner with an agent to stay on top of what’s available in your market and move fast when you find the one. It’s not going to be easy to find a home, but it certainly won’t be as difficult as it has been over the past two years.
Due to the imbalance between the number of homes for sale and the number of buyers looking to make a purchase, the pandemic led to record-breaking increases in home prices. According to CoreLogic, homes appreciated by 15% in 2021, and they’ve continued to rise this year.
Even though housing supply is increasing today, there are still more buyers than there are homes for sale, and that’s maintaining the upward pressure on home prices. That’s why experts are not calling for prices to decline, rather they’re forecasting they’ll continue to climb, just at a more moderate pace this year. On average, homes are projected to appreciate by about 8.5% in 2022 (see graph below):
Selma Hepp, Deputy Chief Economist at CoreLogic, explains why the housing market will see deceleration, but not depreciation, in prices:
“The current home price growth rate is unsustainable, and higher mortgage rates coupled with more inventory will lead to slower home price growth but unlikely declines in home prices.”
For current homeowners looking to sell, know your home’s value isn’t projected to fall, but waiting to make your purchase does mean your next home could cost more as home prices continue to appreciate. That’s why, if you’re thinking about buying your first home or you’re ready to make a move, it may make sense to do so now before prices climb higher. But rest assured, once you buy a home, that price appreciation will help grow the value of your investment.
Whether you’re a homebuyer or seller, you need to know what’s happening in the housing market, so you can make the most informed decision possible. Let’s connect to discuss your goals and what lies ahead, so you can determine the best plan for your move.
Over the past few weeks, the average 30-year fixed mortgage rate from Freddie Mac fell by half a percent. The drop happened over concerns about a potential recession. And since mortgage rates have risen dramatically this year, homebuyers across the country should see this decline as welcome news.
Freddie Mac reports that the average 30-year rate was down to 5.30% from 5.81% two weeks prior (see graph below):
But why is this recent dip such good news for homebuyers? As Nadia Evangelou, Senior Economist and Director of Forecasting at the National Association of Realtors (NAR), explains:
“According to Freddie Mac, the 30-year fixed mortgage rate dropped sharply by 40 basis points to 5.3 percent. . . . As a result, home buying is about 5 percent more affordable than a week ago. This translates to about $100 less every month on a mortgage payment.”
That’s because when rates go up (as they have for the majority of this year), they impact how much you’ll pay in your monthly mortgage payment, which directly affects how much you can comfortably afford. The inverse is also true. A decrease in mortgage rates means an increase in your purchasing power.
The chart below shows how a half-point, or even a quarter-point, change in mortgage rates can impact your monthly payment:
If your home doesn’t meet your needs, this may be the opportunity you’ve been waiting for. Let’s connect to see how you can benefit from the current drop in mortgage rates.
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