Real estate experts have weighed in on the highly anticipated question: When will housing prices drop? So, if you're a prospective home buyer, we can provide you with some clarity on our red-hot housing market.
Home Price Predictions 2022
Many factors affect the forecast in real estate. This is why predicting home prices won’t always ensure results that are 100% accurate. However, experts say that prices are to remain on an upward trend and increase by about 5% this year.
Elements That Impact Home Price Predictions
So, when will housing prices drop? Let’s go over a couple of factors that experts take into account when tackling this question.
Post-Pandemic Rebound
Covid-19 has made a big impact on the housing market. It will continue to play a large part in heightening home sales for years to come. This is due to the popular work-from-home trend the pandemic brought on. Remote work has shifted people’s outlook on real estate.
Today, many Americans working remotely want a secure home they’ll spend most of their time in. With this workplace, flexibility comes more pressure to raise housing prices. As a result, the supply market isn’t able to keep up with demand and may not be able to for a while.
Supply And Demand
There’s a grave shortage of houses for sale right now relative to demand. One reason for the current high demand is millennials. This active generation is now entering their chief homebuying years.
In addition to more millennials purchasing homes, baby boomers are also living longer today. With baby boomers staying in their homes longer, there are fewer houses on the market. What has resulted is a supply-demand imbalance, which will fuel higher home prices. Thus, real estate experts do not expect housing prices to drop for at least the next few years.
As housing prices steadily increase, interest rates are expected to as well.
What Will Interest Rates Be In 2022
Interest today is already high, resting at 4.67% for a typical 30-year mortgage. Plus, it's expected that the Fed will hike up interest rates a couple more times this year. So, if you’re wondering, “how will the interest rate rise affect my mortgage?” you're not alone. Mortgage rates will likely increase as a result of higher interest.
What Will Mortgage Interest Rates Be In 2022
Mortgage interest rates will continue to rise. Housing professionals predict that a 30-year-fixed mortgage rate will increase to 3.6% by the end of this year. But, compare that rate to 40 years ago when it reached 16%, and 2022 doesn’t look too bad. So, mortgage interest rates will still be affordable compared to what they’ve been historically.
When Will Housing Prices Drop?
Housing prices aren’t predicted to drop any time soon. But, that shouldn’t stop you from purchasing the home of your dreams.
Is Now A Good Time To Buy?
If you’re a prospective buyer in 2022, you might want to delay buying a home in hopes of a drop in housing prices soon. Conversely, you may want to lock in a deal now before prices skyrocket.
Experts don’t see prices cooling any time soon. This is because heavy demand and low supply are predicted to stay for the foreseeable future. So, if you're hesitating on buying a home because you think housing prices will drop, it may be wise to pull the trigger now.
Whether you’ve decided to play the long game or jump the gun on a home purchase, the decision is yours. But, you shouldn't base your decision solely on the behavior of the real estate market.
The Market Is Unpredictable
Housing market prices will continue to ebb and flow as the market goes through changes. This means you’ll never be able to time the market perfectly when you’re house hunting.
The market has a reputation for changing like the weather. Housing market forecasts, at best, will give you an idea of what you can expect in the near future. So, don’t let the market’s unreliable nature take hold over your decision to buy a home.
It’s A Personal Decision
All in all, if you’ve found a home that meets your needs and won’t overextend you financially, take the plunge. Regardless of where the ever-changing market is, buy a home if it’s the right move for you to make, considering your finances and personal situation.
When Is The Best Homebuying Season?
If you’re ready to purchase a home, you’ve probably heard conflicting theories about which season is prime for buying. So, let’s clear a few things up. There’s no perfect homebuying season, but each season has its unique pros and cons.
Spring Into Summer
You’ll have more options to choose from during the spring homebuying season. This is because the real estate market is much more active throughout the warmer months of the year. The downside to countless choices for homes is that competition will be red hot. You may have to deal with aggressive bidding wars. You'll also likely have less negotiating power with sellers.
Fall Into Winter
During the colder months, there are always fewer homes for sale. You won’t have close to as many options as you would have had in the summer. However, there will be less competition in the market. This means you could have the upper hand when making a deal with a seller. So, even if housing prices don’t drop, you may still be able to get a sweeter outcome by purchasing a home at this time.
If you’re a first-time home buyer in Minnesota, less competition and more negotiation power may be your silver lining to a frigid winter season.
Factors That Influence A Homebuyer’s Journey
Since the 1970s, the housing supply has reached an all-time low. This is due to more millennials becoming homeowners and an increase in building prices. But how does a limited supply and spike in prices affect you?
Unlike personal preferences and income, some factors lie outside the control of a prospective homebuyer. These factors help determine the forecast for the real estate market, which can have a huge impact on a buyer’s journey. A few factors include our economic state, interest rates, and mortgage availability.
Economy
Typically, home sales are directly tied to the current state of the economy. This year is coupled with rising wages and increased economic growth. So, we can expect people to have better finances to spend on a home, which in turn, will hike up demand and prices. This is another reason why we shouldn’t expect housing prices to drop this year.
Interest
Higher interest rates will increase your total monthly payment. And, higher mortgage payments will bring a lower demand to the housing market. So, a change in interest rates can have a big impact on whether a prospective buyer locks in a deal.
Mortgages
In the late 90s to early 2000s, you didn’t have to jump through too many hoops to get a nice mortgage loan. It seemed like everyone you knew was purchasing a home. However, since the housing crisis of 2008, the lending criteria for loans have gotten more strict. This has created limited mortgage availability. And what will result from limited mortgages is low demand.
What Can We Expect Going Forward?
Aside from more people relocating to the suburbs due to the increase in remote work, mortgage rates will rise and buyer demand will fall.
Mortgage Rates Continue To Climb
In the winter of 2021, mortgage rates hit a record low of roughly 2.66%. Since then, they’ve been on a steady incline. Rising rates may set off warning bells for some prospective buyers, but keep in mind that rates today remain at a relatively low level. Economists expect this slow increase will cost homebuyers an extra $100 each month.
Demand Will Begin To Cool
Work-from-home popularity and limits on new construction fueled the unprecedented rise in buyer demand in 2021. Today, real estate experts see demand cooling down, creating less competition for buyers. We’ll still be in a seller’s market, but it’ll be less chaotic with fewer bidding wars. So, while there won’t be a drop in housing prices in 2022, there will be more available options for prospective homebuyers.
Are you planning to purchase a home this year? Contact us today to speak with an expert to help streamline your homebuying process.