Home Prices Are Not Going Down Anytime Soon

Potential first-time homebuyers who are hoping that homes prices will go down in the future are likely setting themselves up for disappointment. Even with a high number of homes on the market right now, and for the past 6-8 months, prices continue to remain relatively flat. You will see price drops for homes that have been on the market awhile, but that’s more of a function of initial over-pricing than it is of core prices falling.

As mortgage interest rates continue to slowly decline, more buyers will flock into the market, pushing prices higher. Every incremental drop in rates brings more buyers into the market, which increases demand. There are also many owners who are staying put in their homes due to their low interest rate. Until rates come down further, those owners are not going to sell, which will keep inventory levels steady.

When demand rises but supply does not, prices inevitably go up. Until the sellers sitting on low rates begin to sell and there is more supply, we’re not going to see prices go down. At what rate will this begin to happen? No one knows for sure, but owners sitting on 2.5%-3.5% interest rates will likely not sell en masse until rates are well under 5%. And rates under 5% will bring out everyone who is looking and qualified to purchase.

So what is your plan? If you can afford to buy now, it’s probably best to do so. Interest rates are in the low-6% range, so you may need to suffer with a slightly higher-than-comfortable payment for a short period of time. However, refinancing is easy and inexpensive, so if you can handle a slightly higher payment for 6-12 months, it’s likely best to do so, then reduce your payment by refinancing when it makes sense. Paying an extra $200-$300 per month now is much less expensive than paying $10k-$20k or more for a home if you wait a year before buying.