You have probably heard all the news about “home prices are going down,” or “The Housing Crash of 2022.” Let’s decipher what is actually happening.
Home prices escalated at an above average pace for the last two years. In fact, earlier this year a homeseller would expect a flurry of showings followed by a flurry of offers and most likely a final sales price over the original list price. That’s when interest rates were hovering around 3% for a conventional 30 year mortgage. Today, the conventional rate is fluctuating around 7% – the historical average. Even though 7% is historically a good rate, the rapid rise caused buyers to pause and take a breath. The result is a slowdown in activity.
In a few short weeks, buyers went from offering over list price to secure a contract to offering around list price with little competition from other buyers. With the increase in rates, houses aren’t flying off the market, and sellers are being more realistic with their list price. The rise in interest rates has not caused a drop in home values as there are still plenty of buyers and not enough houses for sale as there are still more buyers than homes for sale. In fact, home prices this year are expected to increase by 8%. In 2023, the forecast is for values to rise 3-5% which is a typical average pace of increase. So . . . when the news says home prices are going down, that simply means home prices are not accelerating as fast as they have over the past two years.
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