Home Prices Rose 19.5% in September, Reports Key Index

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  • Annual home price growth keeps soaring as low mortgage rates fuel buyer demand.
  • Phoenix and Tampa top the list for cities with the biggest price growth.
  • Those thinking of buying a home may want to wait until prices start to drop.

Home prices keep rising. When will they come down?

It's no secret that home values have risen a lot this year. But you may be surprised at how high they've jumped.

In September, home prices rose 19.5% from the previous year, according to the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index. And in some metro areas, that growth was even greater:

City Year-Over-Year Home Price Growth
Phoenix 33.1%
Tampa 27.7%
Miami 25.2%
San Francisco 19.8%
New York 15.8%
Data source: S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index

Now, they say what goes up must come down, and while that may have initially applied to the laws of physics, it's easy to argue that it applies to home prices, too. The question is: When will prices start to drop substantially so buyers can purchase homes without busting their budgets?

It's all about inventory

The reason home price growth has soared over the past year has a lot to do with limited inventory. Sellers have been hesitant to list their homes due to economic- and pandemic-related fears. Meanwhile, mortgage rates have sat at attractive levels since 2020. That's prompted a lot of buyers to purchase homes this year, despite limited inventory and rising prices.

Once more inventory hits the real estate market, we should see home values start to come down. But it's unclear when that might happen.

While the economy has improved a lot since the start of the year and unemployment is way down, things aren't looking as rosy right now with regard to COVID-19 cases. Throw in the fact that the winter months tend to be sluggish for new property listings, and we may not be looking at a substantial rise in housing inventory during the first quarter of 2022.

Things could change in the new year's second quarter, especially if the outbreak wanes and the economy continues to strengthen. But that's not guaranteed to happen.

Now, the good news is that home prices should eventually start to come down -- if not in 2022, then perhaps in 2023. But a lot of prospective buyers don't want to wait that long, and they also don't want to risk missing out on the affordable mortgage rates that are available today.

A tough call

Today's home buyers are really in a tight spot due to the aforementioned circumstances. Those who choose to wait things out may benefit from a wider selection of available homes and more affordable prices. And those benefits might more than make up for rising mortgage rates, if they do indeed climb.

In the near term, though, mortgage rates are unlikely to jump too substantially. And if housing inventory ends up increasing in 2022, it could make it possible for a lot more buyers to fulfill their homeownership goals. So if you're eager to buy in the new year, you may want to work on boosting your credit and saving up for a higher down payment over the next few months as that could help open up more options for getting a mortgage.

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