January Home Prices Soared 19.1% But Growth Could Slow by 2023

This rapid rate of home price gains isn't expected to last forever.

To say that 2021 was a difficult year to buy a home would be an understatement. Not only did home prices soar last year, but limited inventory put buyers in a position where they had no choice but to duke it out in bidding wars.

This year, the housing market isn't in much better shape from a buyers' perspective. Not only are home prices still way up, but inventory continues to be limited. Worse yet, mortgage rates are starting off the year at higher levels than we saw throughout 2021. And without lower rates to help offset higher home prices, many buyers could end up getting priced out.

But while home prices may have skyrocketed in 2021, that won't necessarily hold true this year. In fact, the rapid growth we saw last year could slow down substantially.

A much-needed slowdown in housing

In January 2022, home prices were up 19.1% compared to January 2021, according to CoreLogic. But CoreLogic also predicts home price growth will slow down in 2022, so that, annual gains by January 2023 will amount to just 3.8%.

At this point, many buyers are hoping for a significant drop in home prices. But that may not happen in the near term due to strong demand and limited inventory. So at this stage of the game, those looking to purchase a home may need to settle for slower home price growth.

Should you buy a home in 2022?

There's a good chance home prices will remain high in 2022. This especially holds true if inventory doesn't pick up.

We may have some answers pretty soon. Spring is usually the prime time for homes to hit the market on a national level, so we could see inventory levels rise substantially come April or May.

But if that doesn't happen, then it's not unreasonable to assume inventory levels will stagnate in 2022 as they did last year. If that's the case, we shouldn't expect any sort of notable dip in home prices. If anything, they might continue to grow as CoreLogic predicts, albeit at a slower pace than what we saw last year.

All told, you may face your share of challenges if you aim to buy a home in 2022. But to be clear, that doesn't mean you shouldn't move forward with home buying plans. If your income is enough to swing a home at today's prices and mortgage rates, and you have adequate funds on hand for a down payment, then by all means, go for it. But if you're looking for a bargain home, you're less likely to find one this year.

Plus, there's a chance mortgage rates will continue to tick upward as 2022 moves along. It pays to keep tabs on that situation if you're serious about buying, because if so, you may want to lock in a rate before financing a home becomes even more expensive.