Will Home Prices Come Down This Fall? Only if These Things Happen
- Sky-high home prices are making it hard for buyers to purchase homes.
- Many buyers are hoping homes will become more affordable in the coming months.
- If mortgage rates keep rising and the pandemic stays manageable, home prices might start to drop.
Will buyers finally be in for some relief?
There's a reason so many would-be buyers are struggling to purchase a home these days. Home prices are way up on a national level, and they don't appear to be coming down anytime soon.
In May, the median home sale price reached $407,600, according to the National Association of Realtors. That represents a 14.8% increase from a year prior.
Compounding the issue is the fact that mortgage rates are now sitting at much higher levels than they were a year ago. And so now, not only do buyers have to take out larger mortgages, but they also have to pay more interest on the sums they borrow.
In fact, some buyers may be at a point where they're ready to pull out of the market for the summer and hope that things cool down during the fall. And to be clear, that's a distinct possibility. But for that to happen, these things would also need to happen.
1. Mortgage rates keep rising
There's a good chance that mortgage rates will continue to rise this year. That's because the Federal Reserve is moving forward with interest rate hikes in an effort to cool inflation. By making borrowing more expensive, the logic is that consumers should start to spend less, thereby narrowing the gap between supply and demand that's currently driving prices up.
If mortgage rates continue to rise, it could spook sellers into listing their homes sooner rather than later. And when more housing inventory hits the market, home prices should start to come down. That's because there will be more supply to go around, and so buyers won't need to continuously engage in bidding wars, which are notorious for driving home prices upward.
2. The pandemic situation remains stable
Americans have been grappling with the pandemic for well over two years now. Yet somehow, just when we think things are settling down, a new variant emerges to wreak havoc.
Right now, COVID-19 cases are up in many parts of the country. And if that situation worsens, it may lead sellers to hold off on listing their homes. After all, most people don't want more upheaval at a time when there's a broad health crisis brewing. However, if things remain relatively stable on the pandemic front, we could see more sellers start to list their homes. And an uptick in inventory is what's needed to bring home prices down.
What should buyers expect?
Without a crystal ball, it's impossible to predict what home prices will look like a few months down the line. There's a chance they'll be lower than where they are today, but the opposite could end up holding true. And so buyers will simply need to keep tabs on the housing market -- and hope for some near-term relief.
That said, those who are hoping to be in a position to buy a home this fall should work on boosting their cash reserves for a down payment and keeping their credit scores intact (or raising scores that could use work). That way, if inventory does increase, they'll be able to take advantage.
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