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Does It Make Sense To Buy a Home Right Now?

Does It Make Sense To Buy a Home Right Now?

Thinking about buying a home? If so, you’re probably wondering: should I buy now or wait? Nobody can make that decision for you, but here’s some information that can help you decide.

What’s Next for Home Prices?

Each quarter, Fannie Mae and Pulsenomics publish the results of the Home Price Expectations Survey (HPES). It asks more than 100 experts—economists, real estate professionals, and investment and market strategists—what they think will happen with home prices.

In the latest survey, those experts say home prices are going to keep going up for the next five years (see graph below):

a graph of green bars

Here’s what all the green on this chart should tell you. They’re not expecting any price declines. Instead, they’re saying we’ll see a 3-4% rise each year.

And even though home prices aren’t expected to climb by as much in 2025 as they are 2024, keep in mind these increases can really add up over time. It works like this. If these experts are right and your home’s value goes up by 3.78% this year, it’s set to grow another 3.36% next year. And another 3.87% the year after that.

What Does This Mean for You?

Knowing that prices are forecasted to keep going up should make you feel good about buying a home. That’s because it means your home is an asset that’s projected to grow in value in the years ahead.

If you’re not convinced yet, maybe these numbers will get your attention. They show how a typical home’s value could change over the next few years using expert projections from the HPES. Check out the graph below:

a graph of growth in a chart

In this example, imagine you bought a home for $400,000 at the start of this year. Based on these projections, you could end up gaining over $83,000 in household wealth over the next five years as your home grows in value.

Of course, you could also wait – but if you do, buying a home is just going to end up costing you more.

Bottom Line

If you’re thinking it’s time to get your own place, and you’re ready and able to do so, buying now might make sense. Your home is expected to keep getting more valuable as prices go up. Teaming up with a local real estate agent is a good first step to start looking for your next home today.

Why We Aren’t Headed for a Housing Crash

Why We Aren’t Headed for a Housing Crash

If you’re holding out hope that the housing market is going to crash and bring home prices back down, here’s a look at what the data shows. And spoiler alert: that’s not in the cards. Instead, experts say home prices are going to keep going up.

Today’s market is very different than it was before the housing crash in 2008. Here’s why.

It’s Harder To Get a Loan Now – and That’s Actually a Good Thing

It was much easier to get a home loan during the lead-up to the 2008 housing crisis than it is today. Back then, banks had different lending standards, making it easy for just about anyone to qualify for a home loan or refinance an existing one.

Things are different today. Homebuyers face increasingly higher standards from mortgage companies. The graph below uses data from the Mortgage Bankers Association (MBA) to show this difference. The lower the number, the harder it is to get a mortgage. The higher the number, the easier it is:

a graph showing a line going up

The peak in the graph shows that, back then, lending standards weren’t as strict as they are now. That means lending institutions took on much greater risk in both the person and the mortgage products offered around the crash. That led to mass defaults and a flood of foreclosures coming onto the market.

There Are Far Fewer Homes for Sale Today, so Prices Won’t Crash

Because there were too many homes for sale during the housing crisis (many of which were short sales and foreclosures), that caused home prices to fall dramatically. But today, there’s an inventory shortage – not a surplus.

The graph below uses data from the National Association of Realtors (NAR) and the Federal Reserve to show how the months’ supply of homes available now (shown in blue) compares to the crash (shown in red):

a graph of a number of people

Today, unsold inventory sits at just a 3.0-months’ supply. That’s compared to the peak of 10.4 month’s supply back in 2008. That means there’s nowhere near enough inventory on the market for home prices to come crashing down like they did back then.

People Are Not Using Their Homes as ATMs Like They Did in the Early 2000s

Back in the lead up to the housing crash, many homeowners were borrowing against the equity in their homes to finance new cars, boats, and vacations. So, when prices started to fall, as inventory rose too high, many of those homeowners found themselves underwater.

But today, homeowners are a lot more cautious. Even though prices have skyrocketed in the past few years, homeowners aren’t tapping into their equity the way they did back then.

Black Knight reports that tappable equity (the amount of equity available for homeowners to access before hitting a maximum 80% loan-to-value ratio, or LTV) has actually reached an all-time high:

a graph of a growing graph

That means, as a whole, homeowners have more equity available than ever before. And that’s great. Homeowners are in a much stronger position today than in the early 2000s. That same report from Black Knight goes on to explain:

“Only 1.1% of mortgage holders (582K) ended the year underwater, down from 1.5% (807K) at this time last year.”

And since homeowners are on more solid footing today, they’ll have options to avoid foreclosure. That limits the number of distressed properties coming onto the market. And without a flood of inventory, prices won’t come tumbling down.

Bottom Line

While you may be hoping for something that brings prices down, that’s not what the data tells us is going to happen. The most current research clearly shows that today’s market is nothing like it was last time.

Expert Home Price Forecasts for 2024 Revised Up

Expert Home Price Forecasts for 2024 Revised Up

Over the past few months, experts have revised their 2024 home price forecasts based on the latest data and market signals, and they’re even more confident prices will rise, not fall.

So, let’s see exactly how experts’ thinking has shifted – and what’s caused the change.

2024 Home Price Forecasts: Then and Now

The chart below shows what seven expert organizations think will happen to home prices in 2024. It compares their first 2024 home price forecasts (made at the end of 2023) with their newest projections:

a blue and white graph with text

The middle column shows that, at first, these experts thought home prices would only go up a little this year. But if you look at the column on the right, you’ll see they’ve all updated their forecasts and now think prices will go up more than they originally thought. And some of the differences are major.

There are two big factors keeping such strong upward pressure on home prices. The first is how few homes are for sale right now. According to Business Insider:

Low home inventory is a chronic problem in the US. This has generally kept home prices up . . .”

A lack of housing inventory has been pushing prices up for a long time now – and that’s not expected to change dramatically this year. But what has changed a bit is mortgage rates.

Late last year when most housing market experts were calling for home prices to rise only a little bit in 2024, mortgage rates were up and buyer demand was more moderate.

Now that rates have come down from their peak last October, and with further declines expected over the course of the year, buyer demand has picked up. That increase in demand, along with an ongoing lack of inventory, is what’s caused the experts to feel the upward pressure on prices will be stronger than they expected a couple months ago.

A Look Forward To Get Ahead of the Next Forecast Revisions

Real estate experts regularly revise their home price forecasts as the housing market shifts. It’s a normal part of their job that ensures their projections are always up-to-date and factor in the latest changes in the housing market.

That means they’ll continue to revise their projections as the housing market changes, just as they’ve always done. How those forecasts change next is anyone’s guess, but pay attention to mortgage rates.

If they trend down as the year goes on, as they’re expected to do, that could lead to more buyer demand and even higher home price forecasts.

Basically, it’s all about supply and demand. With supply still so limited, anything that causes demand to go up will likely cause prices to go up, too.

Bottom Line

At first, experts believed home prices would only go up a little this year. But now, they’ve changed their minds and forecast prices will grow even more than they originally thought. Connect with a local real estate agent so you know what to expect with prices in your area.

Don’t Let the Latest Home Price Headlines Confuse You

Don’t Let the Latest Home Price Headlines Confuse You

Based on what you’re hearing in the news about home prices, you may be worried they’re falling. But here’s the thing. The headlines aren’t giving you the full picture.

If you look at the national data for 2023, home prices actually showed positive growth for the year. While this varies by market, and while there were some months with slight declines nationally, those were the exception, not the rule.

The overarching story is that prices went up last year, not down. Let’s dive into the data to set the record straight. 

2023 Was the Return to More Normal Home Price Growth

If anything, last year marked a return to more normal home price appreciation. To prove it, here’s what usually happens in residential real estate.

In the housing market, there are predictable ebbs and flows that take place each year. It’s called seasonality. It goes like this. Spring is the peak homebuying season when the market is most active. That activity is usually still strong in the summer, but begins to wane toward the end of the year. Home prices follow along with this seasonality because prices grow the most when there’s high demand.

The graph below uses data from Case-Shiller to show how this pattern played out in home prices from 1973 through 2022 (not adjusted, so you can see the seasonality):

As the data shows, for nearly 50 years, home prices match typical market seasonality. At the beginning of the year, home prices grow more moderately. That’s because the market is less active as fewer people move in January and February. Then, as the market transitions into the peak homebuying season in the spring, activity ramps up. That means home prices do too. Then, as fall and winter approach, activity eases again and prices grow, just at a slower rate.

Now, let’s layer the data that’s come out for 2023 so far (shown in green) on top of that long-term trend (still shown in blue). That way, it’s easy to see how 2023 compares.

As the graph shows, moving through the year in 2023, the level of appreciation fell more in line with the long-term trend for what usually happens in the housing market. You can see that in how close the green bars come to matching the blue bars in the later part of the year.

But the headlines only really focused on the two bars outlined in red. Here’s the context you may not have gotten that can really put those two bars into perspective. The long-term trend shows it’s normal for home prices to moderate in the fall and winter. That’s typical seasonality.

And since the 49-year average is so close to zero during those months (0.10%), that also means it’s not unusual for home prices to drop ever so slightly during those times. But those are just blips on the radar. If you look at the year as a whole, home prices still rose overall.

What You Really Need To Know

Headlines are going to call attention to the small month-to-month dips instead of the bigger year-long picture. And that can be a bit misleading because it’s only focused on one part of the whole story.

Instead, remember last year we saw the return of seasonality in the housing market – and that’s a good thing after home prices skyrocketed unsustainably during the ‘unicorn’ years of the pandemic.

And just in case you’re still worried home prices will fall, don’t be. The expectation for this year is that prices will continue to appreciate as buyers re-enter the market due to mortgage rates trending down compared to last year. As buyer demand goes up and more people move at the same time the supply of homes for sale is still low, the upward pressure on prices will continue.

Bottom Line

Don’t let home price headlines confuse you. The data shows that, as a whole, home prices rose in 2023. If you have questions about what you’re hearing in the news or about what’s happening with home prices in your local area, connect with a trusted real estate professional.

Why It’s More Affordable To Buy a Home This Year [INFOGRAPHIC]

Why It’s More Affordable To Buy a Home This Year [INFOGRAPHIC]

Some Highlights

Experts Project Home Prices Will Increase in 2024

Experts Project Home Prices Will Increase in 2024

Even though home prices are going up nationally, some people are still worried they might come down. In fact, a recent survey from Fannie Mae found that 24% of people think home prices will actually decline over the next 12 months. That means almost one out of every four people are dealing with that fear, and you might be, too.

To help ease that concern, here’s what experts forecast will happen with prices this year.

Experts Project a Modest Increase

Check out the latest home price forecasts from eight different sources (see graph below):

The blue bar on the left means, on average, experts think home prices will go up over 2% by the end of this year – not down.

Prices aren’t likely to depreciate in 2024 because inventory is still tight and lower mortgage rates are leading to strong buyer demand. Those two factors will keep pushing prices up as the year goes on. As Selma Hepp, Chief Economist at CoreLogicexplains:

“With mortgage rates dropping, demand for homes in early 2024 is likely to be strong and will again put pressure on prices, similar to trends observed in early 2023 . . . Most markets will continue to reach new home price highs over the course of 2024.

What Does This Mean for You?

Experts are saying home prices will go up this year, and that’s good news if you’re thinking about buying a home. When you become a homeowner, you want the value of your house to go up. That appreciation is what builds equity and makes homeownership such a good investment over time.

Beyond that, expected home price appreciation also means if you’re ready, willing, and able to buy, waiting just means it will cost more later.

Bottom Line

If you’re worried home prices will come down, don’t be. Many experts believe they’ll actually go up this year. If you have questions or worries about what’s happening with prices in your area, it’s a good idea to talk to a real estate agent.