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Are Home Prices Finally Coming Down?

Here’s what you need to know about the future of home prices.

With the recent substantial increase in mortgage interest rates, many homeowners have been asking, “Will this finally cause home prices to drop?” The answer isn’t cut and dry. In a market where rates are predicted to rise even further this year, buyer affordability could take a serious hit. To give you a better idea of whether your home is expected to lose value in the coming months, I’m going to address four key points that explain what’s happening to buyers in the real estate market and what you can expect in the future if you’re thinking about selling:

1. More expensive mortgages. A higher interest rate means a more expensive loan payment, but the rate at which they’re rising is astounding. Rates are up 2% since the start of the year, which means the average homebuyer’s affordability has dropped by 20%. This has already priced some buyers out of the market, and if rates continue to rise as expected, it will price out even more of them. This is going to make the pool of potential buyers for your home much shallower, resulting in fewer offers.

“Our market isn’t crashing anytime soon.”

2. Increased rental rates. One often-overlooked factor in all of this is rental rates. As homeownership becomes more expensive and more out of reach for some buyers, rental demand is only going to increase, which means that rent prices will jump up as well. 

3. Supply is still short. Although homes are more expensive, the demand for them is still high. The increased interest rates have also caused home sellers to stay in their homes longer, and our typical summer surge of inventory just isn’t happening right now. Low supply is good news for homeowners because it will keep your property values up.

4. Demographics are changing. The biggest generation of homebuyers right now is Millennials. They are the largest generation since Baby Boomers, so their demand for homes will keep demand high for the foreseeable future. 

The current frenzied market has been brought on by basic supply and demand, and any kind of market crash is pretty unlikely. According to Brandon Haefele, CEO of Catalyst Mortgage, “I think we’re now going to start seeing individual markets potentially have some slowdown…my reasoning is we still have extremely low inventory. But it’s not going to go the other way and crash.”

Although rising rates are going to cause some buyers to leave the market entirely, all of the evidence we’ve seen on the ground points to home values continuing to appreciate as long as supply remains this low. This is good news for you if you’re thinking about selling. In the meantime, call or email for more information; we look forward to hearing from you.

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Shauna did an excellent job of consulting with me and my family about how we should prepare our property for market and, once it was ready for market, how we wanted to show and list our property for the best possible exposure. Also, she did an excellent job of representing my family’s interests during the negotiation stage leading up to finalizing the sale.