Why Aren’t Home Prices Crashing?
The housing market has recently undergone a lot of changes. The ability of many people to purchase a home was impacted last year by the drastic rise in mortgage rates. And last summer marked the final peak in property prices following several years of significant price growth. These changes led to a rise in headlines saying prices would end up crashing.
Prices have remained largely stable nationwide, despite the fact that the buying frenzy that increased property values during the pandemic is no longer present. The National Association of Realtors (NAR) Chief Economist, Lawrence Yun, do not expect that to change:
“[H]ome prices will be steady in most parts of the country with a minor change in the national median home price.”
In the current market, you could assume that suppliers would have to decrease their prices to draw in customers, which is part of the reason some people may have been waiting for prices to collapse. Low inventory is another factor at work. And that's restricting how low costs can go, claims Yun:
“We simply don’t have enough inventory. Will some markets see a price decline? Yes. [But] with the supply not being there, the repeat of a 30 percent price decline is highly, highly unlikely.”
We've been at or close to record-low inventory levels for a few years now, as you can see in the graph below.
That lack of available homes on the market is putting upward pressure on prices. Bankrate puts it like this:
“I believe that we’re likely to see low inventory continue to vex the housing market throughout 2023.”
Since they currently have a large amount of equity, sellers are not under any pressure to sell. Homeowners can use that equity as a safety net, which reduces the likelihood of troubled transactions like foreclosures and short sales. Additionally, that equity buffer isn't going anywhere anytime soon because many homeowners are locked into cheap mortgage rates.
Working with a reputable real estate agent who is familiar with your neighborhood and adept at navigating the present market volatility is essential given the lack of properties now on the market.
Bottom Line
Due to limited consumer demand, many people anticipated that prices would fall this year, but that hasn't happened. Why? Not enough houses are available for sale. Let's talk if you're considering moving this spring.
The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Keeping Current Matters, Inc. does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Keeping Current Matters, Inc. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.