Throughout the pandemic, we’ve all heard how crazy the housing market has been. All of a sudden, people flocked to rural areas, causing house prices to rise higher than ever before. People even knocked on the doors of local residents, asking to buy their houses at ridiculous prices.
Personally, I thanked my lucky star for buying my house in 2019.
But finally, there is hope on the horizon for buyers looking to get rid of costly rental payments. The housing market forecast is that prices should start to fall soon. What that looks like is up to the real estate gods (as well as inflation and demand, of course), but let’s see what’s happening right now.
Prices are coming down… some
Back in the first quarter of 2022, house prices rose by 18.7% compared to the same period in 2021. Any home buyer who bought or looked for a home last year will probably tell you that home prices have been astronomical.
Overall, it looks like home prices will start to decline soon, at least some of them. Major cities like Salt Lake City, Boise, and Sacramento are starting to see price cuts, a strong indication of what is likely to happen in the rest of the country.
Read more: How do you know if you’re ready to buy a house?
Buyers are more reluctant to buy
What is really slowing down the housing market is the reluctance to buy. The struggle with high prices, low inventories and rising interest rates has exhausted most potential buyers. According to Housingwire, a recent study shows that 79% of those surveyed believe that now is not the right time to buy a home.
Millennials were one of the most affected generations, with 44% of millennials reporting that they now avoid buying a home because of the price. Compared to the 30% of baby boomers, that’s a large number of young people who prefer rising rents to homeownership.
Read more: Rent is not wasted money: why you should not rush to buy a house
Mortgage rates are jumping… a lot
The final nail in the homeowner’s coffin came when interest rates began to rise in early 2022, jumping by 1.5%. This is the highest rate of climb in 28 years. As of the end of June 2022, the average rate on a 20-year fixed mortgage is 5.86%. Compared to interest rates that hovered just above 2% during the pandemic, today’s rate is quite high.
Inflation is one of the driving factors behind these rises in interest rates. Inflation recently hit a 40-year high, so interest rates have been slowly rising to keep up.
What does this mean for buyers?
For homebuyers, falling home prices aren’t all he boasts. There are other factors that still control the market.
Buyers still face a tough market
Unfortunately, even though home prices are projected to decline in 2023, buyers are struggling now for a variety of reasons. High mortgage rates are attracting more buyers, and with a limited selection, buying a home doesn’t get much easier.
A little Buyers now have room to maneuver
For buyers who can hold on tight and keep looking for homes, the market is getting a little easier to deal with as fewer buyers rush to buy. This means you may not have to resort to checkout waivers, purchases outside your price range, or Zillow listings so you can be sure you’ll be the first to see homes for sale in your area.
What does this mean for sellers
The current market also has a double meaning for sellers, who may be worried about falling home prices. However, sellers still win in many ways.
They may have to lower their prices
As demand for housing falls, many sellers have no choice but to lower the value of their homes. The days of $100,000 homes suddenly costing $500,000 are probably over, unfortunately for sellers.
Inspections are back
During the pandemic and the huge influx of people who suddenly want to become homeowners, housing inspections and housing guarantees have practically ceased. If a house had 20 suggestions, 10 of them that wanted to check out the house were immediately discarded. After all, home inspections can make buyers rethink their decision, so why would a seller need this if it’s not necessary?
As the market slows down and becomes a bit less competitive, it’s safe to assume home inspections will start ticking again. It’s good for buyers. This means you’re less likely to spot any unexpected repairs on your first drive in that an inspector might find. On the other hand, for sellers, it lengthens the sales process a bit.
Read more: Should I skip a home check?
They will still catch a high price (it might take longer)
It’s not like sellers suddenly undervalue their homes just to sell them. They still get amazingly good payouts. The real cold snap is forecast only in 2023, so those who want to sell in 2022 will probably still get more than they could have before the pandemic.
Summary
The housing market has had its ups and downs over the past few years, to say the least. But there are signs that prices are at least starting to fall. Unfortunately, the same cannot be said for interest rates, which continue to rise.
For homeowners looking to sell their property, a small drop in home prices won’t affect too much at the moment. For buyers, there are still a few hassles on the way to getting the deal you’re looking for, but the hope is that at least the price will be less of a barrier.
Featured Image: Tinnakorn Jorruang/Shutterstock.com
