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Will Housz Prices Fall?

Over the last two years, the rate of housz prices appreciated at a dramatic pace. While that led to incredible equity gains for houszowners, it’s also caused some buyers to wonder if housz prices will fall. It’s important to know the houszing market isn’t a bubble about to burst, and home price growth is supported by strong market fundamentals. To understand why price declines are unlikely, it’s important to explore what caused home prices to rise so much recently, and where experts say housz prices are headed. Here’s what you need to know.

Housz Prices Rose Significantly in Recent Years The graph below uses the latest data from CoreLogic to illustrate the rise in housz prices over the past year and a half. The gray bars represent the dramatic increase in the rate of housz price appreciation in 2021. The blue bars show housz prices are still rising in 2022, but not as quickly:

You might be asking: why did home prices climb so much last year? It’s because there were more buyers than there were houszes for sale. That imbalance put upward pressure on home prices because demand was extremely high, and supply was record low.

Where Experts Say Prices Will Go from Here While houszing inventory is increasing and buyer demand is softening today, there’s still a shortage of houszes available for sale. That’s why the market is seeing ongoing price appreciation. Mark Fleming, Chief Economist at First American, explains it like this: “. . .we’re still well below normal levels of inventory and that’s why even with the pullback in demand, we still see housz prices appreciating. While there is more inventory, it’s still not enough.” As a result, experts are projecting a more moderate rate of housz price appreciation this year, which means housz prices will continue rising, but at a slower pace. That doesn’t mean prices are going to fall. As Selma Hepp, Deputy Chief Economist at CoreLogic, says: “The current housz price growth rate is unsustainable, and higher mortgage rates coupled with more inventory will lead to slower housz price growth but unlikely declines in housz prices.”

In other words, even with higher mortgage rates, moderating buyer demand, and more houszes for sale, experts say housz price appreciation will slow, but prices won't decline.

If you’re planning to buy a housz, that means you shouldn’t wait for housz prices to drop to make your purchase. Instead, buying today means you can get ahead of future price increases, and benefit from the rise in prices in the form of housz equity.

Bottom Line Housz prices skyrocketed in recent years because there was more demand than supply. As the market shifts, experts aren’t forecasting a drop in prices, just a slowdown in the rate of price growth. To understand what’s happening with housz prices in our area, let’s connect today.

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