What is preventing home prices from crashing?
The housing market has experienced several changes lately. Last year, mortgage rates increased significantly, which affected the capability of many individuals to purchase a home. Additionally, home prices reached their peak last summer after years of rapid appreciation. Consequently, several news outlets projected a crash in the market.
According to Lawrence Yun, the Chief Economist at the National Association of Realtors (NAR), even though there was a buyer frenzy during the pandemic that resulted in a rise in home values, prices have been steady nationwide. Yun predicts that there will not be any significant changes in the near future.
“[H]ome prices will be steady in most parts of the country with a minor change in the national median home price.”
In today’s market, low inventory is a factor that is limiting how much low prices can go. Some people may have been waiting for prices to come down, thinking that sellers would have to lower prices to attract buyers. However, that is only part of the story.
“We simply don’t have enough inventory. Will some markets see a price decline? Yes. [But] with the supply not being there, the repeat of a 30 percent price decline is highly, highly unlikely.”
The graph below shows that inventory levels have been consistently low or at a record low for the past few years.
That lack of available homes on the market is putting upward pressure on prices. Bankrate puts it like this:
“I believe that we’re likely to see low inventory continue to vex the housing market throughout 2023.”
Home sellers are not in a hurry to sell their homes since they have a high amount of equity at present. This equity provides a safety net for homeowners, reducing the likelihood of financially troubled sales like foreclosures and short sales. Moreover, because numerous homeowners secured a low mortgage rate, their equity is expected to remain consistent.
Given the limited housing supply, it is recommended to collaborate with a reliable real estate agent who is knowledgeable about your community and can expertly deal with the current market fluctuations.
Due to a shortage of available homes for sale, prices have not dropped as anticipated despite low buyer demand. If you plan to move this spring, let’s connect today.