Potential home sellers and buyers both want to know if home prices will fall this year. I’m here to help break down what’s happening with home prices, where experts say they’re headed, and why this matters to you.
Last Year’s Rapid Home Price Growth Wasn Not the Norm
In 2021, home prices appreciated very quickly. One of the reasons why is that record-low mortgage rates motivated more buyers to enter the market resulting in more people looking to make a purchase than there were homes available for sale. That led to competitive bidding wars which drove prices up. CoreLogic helps explain how unusual last year’s appreciation was:
“Price appreciation averaged 15% for the full year of 2021, up from the 2020 full year average of 6%.”
In other words, the pace of appreciation in 2021 more than doubled the 6% the market saw in 2020. And even that appreciation was higher than the pre-pandemic norm which was typically around 3.8% nationally. Basically, 2021 was an anomaly in the housing market spurred by more buyers than homes for sale. I’m sure you heard plenty of reports on record low inventory levels.
Home Price Appreciation Moderates Today
This year, home price appreciation is slowing (or decelerating – NOT depreciating) from the feverish pace the market saw over the past two years. According to the latest forecasts, experts say on average, nationwide, prices will still appreciate by roughly 10% in 2022 (see graph below):
Why do all of these experts agree prices will continue to rise? Even though we’re finally seeing more inventory (homes on market) today, it’s still low overall thanks to several factors, including a long period of litle to no new construction homes being built. Experts also say that’s going to help keep upward pressure on home prices throughout the remainder of this year. Additionally, since mortgage rates are higher this year than they were last year, buyer demand has slowed.
As the market goes through this change, price appreciation this year won’t match the feverish pace in 2021. Honestly, the rapid appreciation the market saw last year wasn’t sustainable anyway.
What Does That Mean for You?
Currently we’re seeing the market going back toward pre-pandemic levels. But even the forecast for 10% national home price growth in 2022 is well beyond the national 3.8% that’s more typical for a normal market.
So, despite the media headlines, experts say home prices won’t fall in most markets. They’ll just appreciate more moderately.
If you are worried the house you’re trying to sell or the home you want to buy will decrease in value, you should know experts aren’t calling for depreciation in most markets, just deceleration. Basically, your home should still grow in value, just not as fast as it did last year.
If you’re considering making a move, you should not wait for prices to fall. Experts say nationally, prices will continue to appreciate this year… just at a more moderate pace. When you’re ready to begin the process of buying or selling, let’s connect as I am your local market expert and will guide you each step of the way!