With Homebuyers Facing Challenges, Where Will Prices Go?
With Homebuyers Facing Challenges, Where Will Prices Go?May 31st, 2018
Home buyers face an uphill battle vs. rates, prices, and inventories, but demand is strong.
The question has been asked a lot lately – is this another bubble? If so, is it going to burst? Will home prices actually drop?? Not according to the top housing market economists. It’s no secret that there are some obstacles to home buying that may lead to slower price growth and sales at some point – buyers are dealing with affordability issues as prices have risen rapidly over the last few years, and that’s been coupled with (and partially caused by) an ongoing lack of available inventory. Now, we’re also beginning to see the very low mortgage rates we’ve enjoyed start to climb back up. And with inflation on the rise again, they’re expected to continue to go higher.
So with all these factors, will buyers begin to disappear? Will we actually see prices reverse course? Not likely, but we are headed for a slow-down in price growth at some point, economists say. The good news is that demand is very high and expected to stay that way as job growth, wages, and job security continue to strengthen. As more homes are built, and more owners list existing homes, inventories are expected to slowly get back to normal levels, which should help with price affordability (especially when builders begin to catch up with building at the lower level price tiers).
Taken all together, these factors lead to an expectation that prices will not drop, but grow at a slower rate. While prices are forecasted to grow by a strong 7% this year, that’s projected to slow to a more moderate 3.1% in 2019.
As Freddie Mac’s chief economist says, “The underlying demand for buying a home is holding up, and will continue to do so, as long as the economy is generating solid job and income growth. Most markets simply need a lot more new and existing supply to cool price growth and give buyers enough choices.”
So the doomsayers, scarred by the Great Recession (understandably), can calm themselves some. We’re not likely to see prices drop in this economy, but if growth levels off a bit, that’s good for the health of the market long term! And that means that buying a home for the long term is still a smart move, even at current prices. Better now than later, even. Rates will keep rising, prices will still go up. So if you’re thinking of making a move, talk to us today! Contact us anytime for any of your Real Estate needs!