One of the most common issues I get as a real estate professional is: “When will the prices drop?”
It makes sense, of course, with titles that predict accidents, recessions and market drops. Buying a house is a huge financial decision and it is natural to wait for the housing market Become more acceptable.
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Except that real estate does not apply as many people think. Of course, home values can vary, but prices are Stuck on the highest elevations. We can partly blame inflation, making it more expensive. We can also blame a A massive lack of housing to maintain competition. Through most of the US, we still don't have enough homes for those who want to buy them.
That's my job like realtor to tell my clients Never rush out To buy the first home they see. But if you are still sitting on the sidelines waiting for a big drop in housing prices, you may be Waiting forever.
Home prices are not falling soon
Many people think that real estate is like stock – prices are rising, prices are decreasing. If time on the market, you can enter into the lowest possible price. Except that homes are not like stock.
Home prices are not only dropped all at once. A combination of factors prevents them from significantly falling, from supply and demand to inflation, from Mortgage rates The emotional attachment of homeowners to their properties.
I have been in the real estate industry long enough to know that housing falls are not happening in a vacuum. Let's dive in the key reasons why a big drop in today's market price is unlikely.
1. The supply is low, demand is high
At essence, the housing market is driven by supply and demand. When there are more buyers than available homes, prices are rising. Depending on what report you read, the United States is short between four and six million homes.
Heavy impetus for homes has been a problem for more than a decade. After the financial crisis in 2008, Construction of home dramatically slowed And never returned completely. Restrictive zoning laws and An increase in construction costs They made it difficult to build new homes at the required pace. In many areas, the high cost of breaking the new construction encourages builders to only focus on higher degrees, leaving shoppers for the first time with even fewer options.
At the same time, the demand for homes is strong. The millennia, the largest generation in the country, are in their main years of houses and many are determined to buy. As long as the market Demand exceeds offerHome prices will remain strong.
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2. Inflation retains home prices elevated
If you were at a grocery store, you filled the gas tank or paid for any service lately, you have seen first hand Inflation affects prices. Housing is no different.
Inflation exerts long -term upward pressure on prices. After reaching the beginning of 2022, inflation began to facilitate after Series of raising interest rates on federal reserves. But recent data show that consumer prices are rising again.
Because inflation erodes the value of money, material assets as real estate become more expensive. A home that cost 300,000 USD in 2010 will now be worth about $ 427,000 from inflation alone. Even if the demand for housing is cooled temporarily, home values tend to grow over time, simply because of how our financial system works.
3. It costs a lot to sell a home
Home sales are not as simple as listing online and waiting for offers. It is a process that comes with significant costs for sellers, including real estate committees, closing costssetting up costs and potential repairs.
For many home owners, sales are expensive and there is no much financial sense. Sellers would rather stay up than to occupy a financial hit, and fewer homes on the market prevent prices from falling.
4. The effect of the rate lock freezes the supply
The effect of locking the rate is one of the biggest reasons why existing homes do not hit the market.
During the pandemic, millions of homeowners locked in ultra -low mortgage rates, some At a low level of 2 to 3%. These homes owners are Don't barely wait to trade their mortgage below 3% for a new to 7%. Even with the increase in home values, many home owners do not want to take a significantly higher mortgage payment for their next home.
To a mortgage rates are significantly reducedMany homeowners will remain placed, maintaining the inventory narrow and prices stable.
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5. People who sell homes also buy them
Most sellers are also buyers. Every home selling is usually compensated with another purchase. Unlike 2008, when seizures flooded the market, today's sellers usually move by choice, not necessity.
Demand for homes has a lot to do with stages of life. People get married, have children, move for jobs, reduce them or look for better schools. Even at a high environmental rate in the last two years, these factors have maintained the housing market.
6. Home owners see greater value in their properties
People have a deep emotional relationship with their homes and it plays a role in prices. When home owners see that the neighbor's house is selling for a top dollar, they often believe their home is worth the same or more. Even in slower markets, Home owners They do not want to accept lower offers unless they absolutely have to sell.
Unlike inventory, where people quickly reduce losses, homeowners tend to hold their properties, rather than taking loss. This is another reason why home prices tend to be sticky, even during economic downturns.
Will the recession lead to lower home prices?
I often hear the argument that home prices will decrease if we enter a recession. Although it is true that economic downturns can affect housing, most recessions do not lead to a significant decline in prices.
Historically, home prices remained stable and even increased during the recession. Lackings tend to affect lower -income workers who are less likely to own homes, and those with their own homes usually have enough capital to avoid distressed sales. Unlike 2008, where risky borrowing led to seizureToday's homeowners are in a much stronger financial position.
Why does it cost to wait for you to buy a home
Over the last 60 years, home prices have been appreciated at an average rate of 4.6% per year. If you are waiting for an accident for housing, you bet on the trend that is extremely consistent.
Even if home prices stagnate, interest rates could remain high, which affects availability much more than a slight drop in price. And it may end up costing you to wait more. Rent instead of buying means missing years of home capitalAnd inflation will only continue to make homes more expensive over time.
Tips for homeowners
If you are trying to decide whether to buy, focus on your financial situation instead of trying to direct the market.
Financial stability: If you can afford A. PaymentMake sure your projected monthly mortgage payment is comfortable and sustainable. You should also have enough money in a bank to close costs, Insurance, taxes and other fees for homeowners.
Think about different markets: Not all real estate markets are created equal. Pay attention to what is happening in your specific area. At the time of this article, Florida's inventory is growing as the northeast is still in a very short supply.
Think long -term: Real estate is not about what will happen today or tomorrow, but decades from now. As a general rule, plan to stay in your home for at least five or seven years, so short -term fluctuations in the market will not be very important.