Since 2020, buyers have been pounded by low inventory, fierce competition, and significant price increases, but quickly rising mortgage rates are making it much more difficult to find an affordable house. Homebuyers are left wondering when the market will experience some respite, and home prices will begin to decline.
Current House Market
Mortgage rates have risen two full percentage points since the beginning of the year, passing 5%. At the same time, property prices have continued to grow, albeit the rate of increase has slowed slightly. Experts think it's doubtful that costs will fall significantly throughout the country soon. While the rate of growth in housing prices will reduce, this will be due to fewer individuals being able to afford to purchase in a more expensive market.
What Can Make Home Prices Drop and What Does This Mean for Homeowners?
From 2021 to the first quarter of 2022, home prices increased by 18.7%, and realtors predict that rates will average approximately 5.7 percent by late 2022. Higher market expenses have put pressure on the housing market, causing the market index to drop to its lowest level in 22 years.
Prices will decline if either supply or demand grows dramatically, and analysts believe the latter is much more likely. The massive increase in mortgage rates, analysts believe, is one of the key drivers behind the probable reduction in demand. The average 30-year fixed mortgage rate has increased by more than two full percentage points since the beginning of the year, putting many purchasers out of reach. Mortgage rates have reduced purchasers' purchasing power by around 14% for the median-priced property. While price growth is expected to halt, this does not always imply that prices will fall. Experts predict that prices will rise at a slower pace than they are now, maybe by 3% rather than 20%. For prices to drop, there should be drastic changes on the supply side—which means newly built houses or people moving out not into other single-family homes but co-living. Without that, the prices will probably be moderate.
So what does this mean for homeowners? While buyers suffer in this challenging market, homeowners see their house prices rise. Homeowners are enjoying more significant equity benefits as property values rise. This year, home prices were up by 20% in March, leading to the largest one-year gain in average home equity wealth for owners.
So is it the best time to sell my home?
Of course, what occurs nationally does not always happen in your community. Prices are projected to decrease in some areas. Each market is likely to act differently. As experts would say, it’s market-specific, so the first step is to investigate your community and get to know your local real estate market. Though the demands for a home might be high, it does not mean that you can sell your home right away, quick, and easy, especially if you’ll have to go through a lot of processes in selling your home via a real estate agent or for sale by owner (FSBO). Know the best time of the year to sell your home here.