Home prices continue to rise despite rising mortgage rates and housing supply — factors that typically put pressure on home prices. But the numbers still show that the market is fairly resilient and costly.
The median single-family home listing price nationwide in June was $450,000, up 16.9% from a year earlier and up more than 31% from June 2020, according to Realtor.com. As homes approach $1 million, buyers are starting to pull out of the market. Mortgage applications fell to their lowest level in late June, the biggest drop in 22 years, according to the Mortgage Bankers Association (MBA).
The current shift in the housing market is partly attributable to the broader economy and consumer sentiment. Now the economy is developing — on the one hand, there are signs that the economy is weakening as gross domestic product (GDP) has fallen for two consecutive quarters, which some economists believe heralds a recession. But on the other hand, the job market and consumer spending remain strong.
The MBA doesn’t include a recession in their baseline forecast, but they say it’s a “coin toss” for now and estimate the probability of the U.S. entering a recession in the next 12 months is about 50 percent.
Real estate market forecast for August 2022
Many in the real estate industry are warning buyers not to time the market as the economy is going through this period of uncertainty.
“The decision to buy now or wait depends on the motivation and circumstances of the individual buyer. Waiting may not be a viable option,” said Krista Forsberg, a real estate agent with Keller Williams Realty in Edina, Minnesota. “Even if buyers can defer the moratorium on purchases until later this year or into 2023, there may not be any significant improvement in prices or rates.”
Real estate experts say they are keeping a close eye on the economy, which is pulling in all directions from factors such as inflation, soaring oil prices, the war in Ukraine and the coronavirus pandemic. While housing has been the star of the U.S. economy in recent years, there are signs of wear and tear — namely rising interest rates — making it harder for buyers to get affordable housing.
“I think the sharp rise in interest rates scares both buyers and sellers; they don’t know if rates will stay or continue to rise. The lack of predictability means many buyers and sellers will just sit back and wait,” said Shi, founder of October Realty in Los Angeles. Tiff Simmons said. “But others will seek to sell or buy before things get worse.”
Existing-home sales fell 5.4% from May to June, the fifth straight month of sales declines, according to the National Association of Realtors (NAR). However, the median sale price for those homes hit an all-time high of $416,000 in June, up 13.4% year over year. All of this suggests that property prices won’t be falling anytime soon.
Will house prices continue to rise?
Inflation, high mortgage rates and record-high home prices are reducing housing affordability. According to a Zillow report, typical monthly mortgage payments are now 75% higher than they were in June 2019. Revenues can’t keep up with rising costs. Wages rose 6.7% in June, lagging inflation’s rise of 9.1%.
MBA economists also don’t expect house prices to fall anytime soon. They reported that the average sale price of an existing home was $361,400 in the first quarter, and they expect it to rise to $402,000 in the second quarter, before being slightly flat to $379,000 in the third quarter.
2022 Housing Inventory Forecast
Some economists believe that house prices may rise, but so will options.
Year-to-date, Realtor.com’s inventory forecast has changed dramatically, from a mere 0.3% increase in inventory to a current forecast for a 15% increase in the inventory of homes for sale.
“While housing costs remain high, forcing home buyers to make difficult decisions about budget priorities, the number of homes for sale is expected to continue to increase, building on a trend reversal that began in May,” the Realtor.com report said. .”
“As more homeowners seek to adapt to changing personal needs and take advantage of favorable market conditions to access the substantial assets they may have accumulated, homebuyers will have more options.”
Buy now or wait?
Buying a home – no matter the market – is a very personal decision. Since homeownership is the largest purchase in most people’s lives, it’s crucial to have a good financial position before buying.
Use the Mortgage Calculator to calculate your monthly housing costs based on your down payment and interest rate.
Trying to time the market or predict what might happen next year isn’t the best home-buying strategy. Instead, it’s best to buy according to your budget and needs. If you can find a home you like in your favorite area, and it also fits your budget, then it might be for you. However, if you make too many sacrifices to buy a home, you could end up causing buyer remorse and dumping expensive albatrosses.
Tips for buying in a hot real estate market
Start with a budget and make an agreement with yourself to stick to it. Even with a slight increase in homes for sale, buyers are still facing high home prices and mortgage rates in the 6% range.
“There are a lot of factors in buying right now, and frankly, a lot of people are afraid of making mistakes,” said Jennifer Baptista, a real estate agent with Fresh Starts Registry in Andover, Massachusetts. “As a seasoned real estate agent, Broker, the first question I ask my clients is, ‘What’s your gut feeling?’ If [timing] doesn’t feel right, you’re always going to find the wrong house, so just wait.”
Rachel Luna, director of Patriot Title in Houston, also advises buyers to slow down. The scarcity mentality in the market drives quick decisions that can quickly lead to buyer remorse.
The problem is, if you realize you’ve paid too much, or just bought an apartment you don’t like, you can’t return the house. Seller costs can be as high as 10% of the home’s sale price, so if you turn around and sell it, you could end up losing money.
“Be patient,” Luna said. “What really matters when buying a home is your personal finances and long-term financial stability. Ask yourself: Are you debt free? Do you have an emergency fund to cover your expenses for three to six months? Will your monthly home payments be 25% or less of your monthly take-home pay? If you can’t easily meet those conditions, it doesn’t matter if the market is in your favor.”
Tips for Selling in the Hot Real Estate Market
The first step to a successful sale is to find a real estate agent who knows the area and is highly recommended. A good agent will work closely with you to list your home at a competitive price while accepting questions and offers from potential buyers.
At the same time, present your home in the best possible way. Not everyone has the money for renovations and repairs, but a little sweat can go a long way. The first step is to organize, organize, organize.
Put away piles of bills and receipts, put away toys, and keep your kitchen tidy. Bright lights are also a great way to make your home feel spacious and bright.
Even if your home is outdated, clean spaces give buyers a chance to imagine the potential of a new home.
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