6 Reasons Home Prices Won’t Go Down, According to This Realtor
One of the most common questions I have as a real estate professional is: “When will house prices fall?”
This makes sense; Buy a house It’s a huge financial decision. Headlines predict collapse, recession and market Slumpnaturally, we have to wait for the housing market Become more affordable.
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However, real estate behavior is not the way many people think it does. Of course, the value of the house may fluctuate, but the price is Stuck at a height of history. We can partially blame inflation, which makes everything more expensive. We can blame one too A large number of housing shortages Stay competitive. In most parts of the United States, we still don’t have enough homes for those who want to buy it.
Tell my client that I work as a real estate agent Never drive out And buy the first house they saw. But if you are still waiting for a big drop off the market, then you may be Wait forever.
House prices won’t fall soon
Many people think that real estate is like stocks – prices go up, prices go down. If you’re in the market, you can enter The lowest price. Except for the house, it doesn’t look like stocks at all.
House prices are not just a sudden drop. The combination of various factors prevents them from falling significantly, from supply and demand to inflation, from Mortgage Rate Emotional attachment to homeowners is on their characteristics.
I’ve been in the real estate industry long enough to know that a house’s recession won’t happen in a vacuum. Let’s dig deeper into the main reason why prices are huge in the market today is unlikely.
1. Very low supply and high demand
The core of the housing market is powered by supply and demand. Prices rise when there are more buyers than available homes. According to the report you read, the United States is between four and six million homes.
Severe housing supply has been a problem for more than a decade. After the 2008 financial crisis, Buildings slow down sharply And it will never be fully upgraded. Restrictive partitioning method and Construction costs rise It is difficult to build a new home at the speed required. In many areas, the huge cost incentives for new construction have made builders focus only on high-end homes, leaving First time buyer Less choices.
At the same time, there is a great demand for houses. Millennials are the largest generation in the country and are in the main home purchase year and many are determined to buy it. As long as the market Demand exceeds supplyhousing prices will remain stable.
2. Inflation makes house prices rise
If you’ve been to a grocery store, filled your gas tank or paid for any service, you’ve seen firsthand how Inflation affects prices. Housing is no different.
Inflation has put long-term pressure on prices. After reaching its peak in early 2022, inflation begins to ease as it begins Fed’s series of interest rate hikes. But recent data show that consumer prices have risen again.
As inflation erodes the value of money, tangible assets such as real estate become more expensive. Now, homes that cost $300,000 from inflation alone can be worth about $427,000 in 2010. Even if housing demand temporarily cools down, housing value will rise over time simply because of the way our financial system works.
3. A lot of money is spent on selling a house
Selling a home is not as simple as listing online and waiting for a quote. This is a seller, including the real estate commission, including the real estate commission, Close Feeinstallment fees and potential repairs.
For many homeowners, the sale is expensive and the financial significance is not much. Sellers would rather stay than be financially hit, while fewer homes in the market prevent prices from falling.
4. Rate effect freeze power supply
The rate effect is one of the biggest reasons existing homes fail to enter the market.
Thousands of homeowners locked in ultra-low mortgage rates during the pandemic, some homeowners As low as 2% to 3%. These homeowners are Don’t desire Put it below 3% mortgage transactions to 7%. Even if home values rise, many homeowners don’t want to pay a higher mortgage for their next home.
Until mortgage The rate dropped sharplymany homeowners will remain unchanged, keeping inventory tight and price stable.
5. People who sell houses are buying
Most sellers are buyers too. Every home for sale is usually offset by another purchase. With the 2008 foreclosure flooding the market, today’s sellers are often by choosing to move, not out of necessity.
The demand for houses and Life stage. People get married, have kids, move to work, reduce size or look for better schools. Even in the past two years, these factors have kept the development of the housing market unchanged.
6. Homeowners see higher value in their property
People have a deep emotional connection with their home, which plays a role in pricing. When homeowners see their neighbor’s houses for sale at a high price, they often think that their homes are worth the same or more. Even in slower markets, Homeowner Unwilling to accept lower offers unless absolutely necessary.
Unlike stocks where people quickly reduce losses, homeowners tend to keep their property rather than suffer losses. This is another reason why house prices tend to be sticky even during the downturn.
Will the recession lead to lower housing prices?
I often hear the argument that if we enter a recession, house prices will fall. While economic downturns do affect housing, most recessions do not lead to a significant drop in prices.
Historically, house prices remained stable or even rose during the recession. Layouts often affect low-income workers who are unlikely to become homeowners, and those who own the home usually have enough equity to avoid the sales caused. Different loans from 2008 Causing foreclosurehomeowners today are in a stronger financial position.
Why wait for a house to buy more
House prices have been appreciated at an average rate of 4.6% per year over the past 60 years. If you are waiting for a housing crash, you are betting on a very stable trend.
Even if home prices stagnate, interest rates may remain high, which will affect affordability far exceeding the price drop. And it may end up spending more waiting. Renting a house instead of buying means missing out Years of home net worthinflation will continue to make homes more expensive over time.
Tips for home buyers
If you want to decide whether to buy or not, focus on your financial situation rather than trying to time the market.
Financial stability: If you can afford it down paymentmake sure your expected monthly mortgage payments are comfortable and sustainable. You should also have enough money in the bank to complete the closing fee, Insurance, taxes and other homeowner fees.
Consider different markets: Not all real estate markets are equal. Pay attention to what is happening in a specific area. At the time of this article, inventory in Florida is growing, while the Northeast is still short.
Long-term thinking: Real estate is not about what will happen today or tomorrow, but decades from now on. Generally speaking, planning to stay in your home for at least five to seven years is irrelevant to short-term market volatility.
