Throughout the pandemic, we all heard how crazy the housing market was. Suddenly, people were flocking to rural areas, driving housing prices up higher than they ever had been before. People were even knocking on the doors of locals, asking to buy their houses for ridiculous prices.
Personally, I was thanking my lucky stars that I bought my home in 2019.
But finally, there’s hope on the horizon for buyers looking to rid themselves of costly rent payments. The housing market prediction is that soon prices should start to drop. What this looks like is up to the real estate gods (and inflation and demand, of course), but let’s take a look at what’s happening right now.
What’s Ahead:
Prices Are Going Down… Some
Back in the first quarter of 2022, house prices were up 18.7% from the same time in 2021. Any homebuyer who bought or searched for a home during the past year would likely tell you that home prices were astronomical.
In general, it looks like housing prices are going to start to lower soon, at least some. Large cities like Salt Lake City, Boise, and Sacramento are starting to see price declines, which is a strong indicator of what is likely to come throughout the rest of the country.
Read more: How Do You Know When You’re Ready to Buy a Home?
Buyers Are More Reluctant to Buy
What’s really slowing down the housing market is an unwillingness to buy. Battling high prices, low inventory, and increasing interest rates has exhausted most potential buyers. According to Housingwire, a recent study shows that 79% of those polled believe now is a bad time to buy a home.
Millennials have been one of the harder hit generations, with 44% of Millennials reporting they are avoiding buying a home right now due to price. Compared to 30% of Baby Boomers, this is a high number of young people choosing rising rents over homeownership.
Read more: Renting Is Not Wasted Money: Why You Shouldn’t Be in a Rush To Buy a Home
Mortgage Rates Are Jumping… By a Lot
The final nail in the coffin for homeowners came when interest rates started to rise at the beginning of 2022, jumping 1.5%. That’s the highest rate climb in 28 years. As of the end of June 2022, the average rate for a 20-year fixed mortgage is 5.86%. Compared to interest rates that hovered just over 2% during the pandemic, today’s rate is quite high.
Inflation is one of the driving factors behind these increased interest rates. Inflation reached a 40-year high recently, so interest rates have slowly risen to keep pace.
What All This Means for Buyers
For homebuyers, the lowering of housing prices isn’t all it’s cracked up to be. There are other factors still controlling the market.
Buyers Are Still Facing a Tough Market
Unfortunately, even with housing prices prophesied to cool down in 2023, buyers are now having difficulties for different reasons. High mortgage rates are taking out more buyers, and with still a limited inventory to choose from, shopping for a home isn’t getting much easier.
Some Buyers Now Have Wiggle Room
For buyers who can hang strong and continue looking for homes, the market is getting a little easier to deal with since fewer buyers are rushing to buy. This means you might not have to resort to waiving inspections, shopping way out of your price range, or stocking Zillow listings so you can make sure you’re the first one to see the homes for sale in your area.
What It Means for Sellers
The current market is also two-fold for sellers who may be worried about falling home prices. Sellers are still getting the better end of the deal in a lot of ways, though.
They May Have To Lower Prices
As demand for housing goes down, many sellers have no choice but to lower their home values. The days of $100,000 homes suddenly being worth $500,000 are likely over, unfortunately for sellers.
Inspections Are Coming Back
During the pandemic and the huge influx of people wanting to suddenly own their homes, housing inspections and home warranties all but halted. If a house had 20 offers, the 10 of them that wanted a home inspection were thrown out immediately. After all, home inspections can force buyers to rethink their decision, so why would the seller want one if they didn’t have to?
With the market slowing down and becoming a bit less competitive, one can assume that home inspections will start to tick back up. For buyers, that’s a good thing. It means you’re less likely to find any surprise repairs when you first move in that an inspector would have caught. For sellers, on the other hand, this does make the selling process a little longer.
Read more: Should You Skip Your Home Inspection?
They’ll Still Snag a High Price (It May Just Take Longer)
It’s not like sellers are suddenly undervaluing their homes just to sell them. They’re still getting astoundingly good payouts. It’s not until 2023 that the real cool down is predicted, so those looking to sell in 2022 will likely still get more than they would have pre-pandemic.
Summary
The housing market has had its ups and downs over the last few years, to say the least. But there’s a sign that at least prices are starting to drop. Unfortunately, the same can’t be said for interest rates, which continue to climb.
For homeowners looking to sell, the slight dip in housing prices won’t affect them too much at this exact moment. For buyers, there are still a few challenges in the way of getting the offer you’re looking for — but there is hope that at least price will start to be less of a barrier.
Featured image: Tinnakorn jorruang/Shutterstock.com
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