Why Aren't Housing Costs Collapsing?
Recently, there have been numerous changes in the housing market. Last year, mortgage rates increased considerably, affecting the ability of many individuals to purchase a home. And after several years of strong price increase, housing prices eventually reached their pinnacle in the summer of last year. These modifications led to a spike in news articles predicting a price fall.
Even though we’re no longer seeing the buyer frenzy that drove home values up during the pandemic, prices have been relatively flat at the national level. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), doesn’t expect that to change.
“[H]ome prices will be steady in most parts of the country with a minor change in the national median home price.”
You might think sellers would have to lower prices to attract buyers in today’s market, and that’s part of why some may have been waiting for prices to come crashing down. But there’s another factor at play—low inventory. And according to Yun, that’s limiting just how low prices will go
“We simply don’t have enough inventory." Will some markets see a price decline? Yes. [But] with the supply not being there, the repeat of a 30 percent price decline is highly, highly unlikely.”
As you can see in the graph below, we’ve been at or near record-low inventory levels for a few years now.
That lack of available homes on the market is putting upward pressure on prices. Bankrate puts it like this:
“This ongoing lack of inventory explains why many buyers still have little choice but to bid up prices. And it also indicates that the supply-and-demand equation simply won’t allow a price crash in the near future.”
If more homes don’t come to the market, a lack of supply will keep prices from crashing, and, according to industry expert Rick Sharga, inventory isn’t likely to rise significantly this year:
“I believe that we’re likely to see low inventory continue to vex the housing market throughout 2023.”
Currently, sellers are under no compulsion to sell because they have ample equity. This equity acts as a safety net for homeowners, making it less likely that they will have to go through hard sales like foreclosures or short sales. Due to the fact that many homeowners are tied to cheap mortgage rates, this equity cushion is unlikely to vanish very soon.
Since there aren't many homes on the market right now, it's important to work with a reputable real estate agent who knows your area and can handle the unstable market right now.
Many people predicted that prices would fall this year due to poor buyer demand, but that hasn't happened. Why? There aren't enough houses on the market. Let's talk if you're thinking about moving this spring.
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