New Data Finally Points to Slowdown in Home Price Increases

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  • Home buyers have been grappling with sky-high home prices.
  • For the first time in a while, home price gains seem to be dipping.

Well, that's some encouraging news for home buyers.

There's a reason buying a home has been a struggle since the latter part of 2020. Home prices have been soaring on a national level, and many buyers just don't have the money to pay the sky-high prices sellers have been asking for.

But recently, some good news came through on the home price front. And it may be a sign of positive things to come.

Are home prices finally cooling off?

In April, home prices rose 20.4% on a national level compared to where they sat a year prior, according to the S&P CoreLogic Case-Shiller Index. Now clearly, that's not a small gain. However, it's a less-robust gain than March's reading from the same index, which saw home prices increase 20.6% on an annual basis. And that's a good thing, because the last time home price gains dipped (modestly) was back in November of 2021.

Meanwhile, a lower level of home price gains is only one sign that the red-hot housing market may finally be cooling off. In May, existing home sales dropped 3.4% compared to the previous month, and May's number was actually the weakest since June of 2020. Those two factors combined should give today's wannabe home buyers more hope.

Will you be able to buy a home this year?

While a dip in home price gains is a good thing for buyers, it's important to look at the bigger picture -- that home prices are still up more than 20% compared to a year ago. While it's good to see signs of a housing market cooldown, the reality is that we're not there yet. And we may not get there at any point this year.

As such, if you've been struggling to buy a home, you may want to just assume that those plans will be on hold for the rest of the year. Let's remember, too, that mortgage rates have been climbing since the start of the year, and those don't seem to be dipping back down to more affordable levels.

Last year, home buyers had to grapple with sky-high home prices. But they at least had lower mortgage rates available to them to help offset those higher prices. This year, rates are the highest they've been in well over a decade, so unfortunately, buying a home may still be off the table for a lot of people.

Now this isn't to say you absolutely won't be able to purchase a home at any point in 2022. Maybe you recently got a raise at work and have a lot of money saved for a down payment. Those things, combined with a great credit score that translates into some mortgage rate savings, could make buying a home a possibility for you this year.

But all told, it's important to be realistic about the state of the housing market. While things are looking better for buyers, a lot of progress still needs to be made. And that may not happen in the course of the next six months.

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