Key Index Shows 19.1% Home Price Gains in October

Two people viewing the interior of a house with a realtor.

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High home prices are great for sellers but continue to pose a challenge to buyers.

Key points

  • Home prices were up 19.1% in October compared to the previous year.
  • At the same time, home price growth slowed down compared to September.

There's a reason prospective buyers struggled to purchase homes in 2021. Property values started off the year at inflated levels, and that trend continued month after month.

In October 2021, home prices rose 19.1% compared to October 2020, according to the S&P CoreLogic Case-Shiller national home price index. That represented the fourth-highest gain in the 34 years the index has been tracking that data.

At the same time, though, October's home price gains were slightly lower than those recorded in September. That month, home price gains amounted to 19.7%. If gains continue on a downward trend, it could be good news for potential buyers in 2022.

Will home prices come down this year?

For months, prospective buyers have been banking on home prices coming down in 2022. But whether that happens in a significant way will largely boil down to inventory.

A big reason home prices have been so high is that there hasn't been enough inventory to meet buyer demand. And so buyers have been engaging in bidding wars, thereby driving home prices up, in an effort to get their offers accepted.

Meanwhile, we're starting off 2022 with mortgage rates sitting at competitive levels, as was the case throughout 2021. Since that's apt to fuel continued buyer demand, the only way for home prices to drop a lot is to see an influx of inventory.

But that's not something we should expect anytime soon. A big reason home inventory lacked in 2021 was that many sellers held off on listing their properties due to economic and pandemic-related uncertainty. Right now, the U.S. economy is in pretty good shape, with unemployment having reached pre-pandemic levels.

But from a COVID-19 perspective, we're starting off 2022 on shaky ground. Cases are soaring on a national scale due to the highly transmissible omicron variant. And until that situation calms down, we're unlikely to see much movement on the home listing front.

What to do if home price growth doesn't slow

Those looking to buy a home in 2022 may have to contend with the same high prices buyers faced in 2021. Now may be a good time for prospective buyers to reassess their finances and see how much house they can truly afford to take on. As a general rule, spending more than 30% of one's take-home pay on housing costs is a bad idea -- one that can lead to a world of financial stress. Anyone looking to buy in the near term should run some numbers before applying for a home loan.

At the same time, prospective buyers should do whatever they can to make themselves viable mortgage candidates. That could mean improving their credit scores and paying off existing debt.

While October's home price gains were lower than September's, they were still quite significant. Homes could remain expensive during the first part of 2022, if not the entire year. That's something buyers will need to prepare for.

Our Research Expert