How Has the Market Shift Impacted Your Home’s Value?
Many homeowners worry about recent real estate headlines and talk of home pricing declines. You may wonder, "Will the value of my home plummet?" — especially if you plan to sell your home in the coming months.
Persistent forecasts of a housing market downturn may make you hesitant to list your home for sale. And with mortgage rates rising, the pool of potential buyers seems to be dwindling, too. When fewer buyers are on the market, sellers often have to adjust home pricing to attract those who remain. Will this less-than-favorable situation have to include you?
You might also wonder if real estate market conditions are so bad that you won't be able to sell at a good price. Should you hold off selling altogether and wait for better times to return?
It's worth examining these conditions in more detail. Let's dive into what's really happening to U.S. real estate beyond the sensationalist headlines.
Why Deceleration in Home Pricing Does Not Mean Depreciation in Home Values
There's no denying that the real estate market realities in 2022 differ from those in 2021. The U.S. real estate market has gone from a year of record-breaking home price growth (the 20-percent home value increases are now legendary) to a decline in home price growth. In fact, according to Redfin, homes have sold for less than asking for the first time since March 2021.
Does this downward trend in home price growth signal a depreciation in home values? The great news for sellers is that it does not.
The main difference between home prices and home values is that home prices fluctuate over the short term, depending on economic forecasts and unforeseen circumstances that influence the economy. On the other hand, home values fluctuate much more slowly over longer periods. A home price is the price buyers are willing to pay for a home due to several variables.
A home value is more stable over time, depending on the size and type of house you have, its condition, and its location. Home values in some areas will be relatively impervious to short-term economic shocks, while less economically stable areas may experience more significant fluctuations during challenging times.
Hiring an experienced local real estate agent will help you determine how much the current conditions might affect your home price and whether you should sell right now or hold off for a few months.
Why 2022 Is Not as Bad for Home Pricing as Everyone Thinks
The past three years illustrate this point perfectly. Home prices rose at unprecedented rates during 2021 mainly because no one was selling during the Covid shutdowns of 2020. Pent-up demand for homes combined with a decimated inventory of for-sale listings caused home prices to skyrocket to levels never seen before. There weren't enough homes going around, leading to a buyer frenzy.
By contrast, 2022 has been a relatively tough year for the real estate market. The U.S. economy is slowing due to several factors, including rising living costs, inflation, and mortgage interest rates, making housing less accessible to buyers.
However, it's crucial to put this slowdown into a longer-term perspective. If current real estate market conditions are compared to other years in the past decade rather than the outlier year of 2021, things begin to look markedly less alarming.
Home sales went down in 2022, but only 0.9% compared to the average volumes over the past eight years. If we look at data from the National Association of Realtors, 2013 and 2014 were substantially slower years for real estate, while the current levels of home sales are only slightly lower than the 2018-2019 pre-pandemic levels.
Why is this data set significant? Most importantly, it indicates that home demand remains strong despite decreasing home pricing growth. This fact will keep home values high for a long time to come. It's crucial to note that home prices are not falling at the moment: they are still increasing — just at a slower rate than the outlier 2021 rates. So, while the housing market may be slowing down, it has not entered the much-rumored downturn phase.
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The key to buying is to be prepared and know which tools you want to utilize to make your home more affordable. We'd love to help you decide if now is the time to begin the home buying process.