Home Prices Rose 19.8% in August -- but Here's Why Buyers Shouldn't Panic
by Maurie Backman | Published on Oct. 30, 2021
Home values rose again, but things seem to be tapering off.
Buyers in today's real estate market have been grappling with ultra-high home prices. In August, home prices rose 19.8% on a year-over-year basis, according to the S&P CoreLogic Case-Shiller Indices. While that may seem like bad news for buyers, it actually isn't for one key reason.
In today's housing market, steady is good
Home prices have risen every month since early 2020. We can thank low mortgage rates for that.
Since rates have been competitive, buyers have been clamoring to purchase homes. At the same time, supply has been low, so it's caused a lot of bidding wars to emerge. When bidding wars are widespread, they can drive home prices up on a national level.
Now clearly, August's 19.8% increase in home prices from the previous year is a big jump. But the good news is that the S&P CoreLogic Case-Shiller Indices held steady from where they sat in July. And that's an indication that home price growth may finally be tapering off.
Will home prices come down soon?
Let's not jump the gun. The fact that home prices didn't rise on an annual basis from July to August is a positive thing for home buyers. But home prices are still quite inflated, and they'll likely remain so until more homes hit the market.
When that will happen, though, is anyone's guess. Many real estate experts think home listings have been sluggish because sellers haven't wanted to make major moves during a time ridden with uncertainty (a pandemic will do that to you). But since we're not out of the woods on the COVID-19 front, sellers may continue to hold off on listing homes for many more months to come.
Another thing to keep in mind is that in many parts of the country, listing a home during the winter is undesirable. There are snowstorms and weather events to contend with, and it's hard to show off a home's curb appeal at that time of the year. At this point, the earliest we can really expect a major influx of homes to hit the market is spring. That means it could be months until home prices drop significantly.
Should you wait to buy a house?
If you buy a home today, or anytime within the next few months, there's a good chance you'll get stuck with a higher mortgage on it. If you can afford that, then you don't necessarily need to wait to buy. In fact, it could benefit you to purchase a home in the next few months, before mortgage rates start to climb. Right now, they're still sitting at attractive levels.
But if buying a home soon means stretching your budget to an uncomfortable degree, then you may be better off waiting. While mortgage rates could rise in 2022, they're unlikely to increase a lot.
The fact that home prices held steady from July to August is a good thing. We'll need to keep an eye on the data to see if that trend continues, as it could help guide some buyers' decisions.
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