Home Prices Just Hit a Turning Point After Nearly a Year, but Will Buyers Miss It Amid the Holidays?
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Reasons To Sell Your House This Season
While many homebuyers might be taking a break from their house hunt to indulge in some eggnog and holiday cheer, the few stalwart home shoppers still out there right now have a fantastic opportunity on their hands.
Want proof? Home price growth fell to 9.5% for the week ending Dec. 10, down from 10.3% for the week ending Dec. 3. And that shift to single-digit growth is significant.
“This slowdown marks the first time in 49 weeks, nearly one year, that median home prices have advanced at a single-digit pace,” explains Realtor.com® Chief Economist Danielle Hale in her weekly analysis.
And it’s not just home price growth dropping as 2022 comes to a close: Mortgage interest rates also dipped for the fifth week in a row.
So what might happen for the rest of the month, and once 2023 officially rolls in? Our weekly column “How’s the Housing Market This Week?” breaks down the latest real estate statistics and what it all means for homebuyers and sellers.
A breakthrough in home prices
‘Tis the season for reflection, so why not take a look back at the roller-coaster ride of home prices this year?
In June, the median list price for properties peaked at $449,000. That price fell to $416,000 in November.
In the grand scheme of things, home prices remain high. Yet the recent reduction in price growth to 9.5% “marks a significant slowdown from peak growth earlier this year when listing prices were growing at a nearly 18% year-over-year pace,” says Hale.
The downward trend in mortgage rates
In late October, mortgage rates hit a 20-year high of 7.08% for a 30-year fixed-rate mortgage. This record-setting rate meant many buyers could no longer afford the same home they could have a year earlier, so many called off their search.
Yet for the past five weeks, rates have declined, sinking to 6.31% for the week ending Dec. 15, according to Freddie Mac.
“Today’s home shoppers have the benefit of mortgage rates that are three-quarters of a point lower than early November’s high thanks to recently favorable inflation readings,” says Hale.
Yet despite these downward trends, many buyers still seem to be abstaining from market activity. So why aren’t home shoppers taking advantage of the one-two combo of slowing home prices and lower mortgage rates?
“Whether holiday cheer or a still dismal view of current housing market conditions is the bigger driver of the pullback is an open question,” says Hale.
Housing supply balloons as demand slows
One metric that didn’t fall last week was the number of homes buyers had to choose from.
The number of homes actively for sale for the week ending Dec. 10 was up 55% compared with a year ago, indicating that home shoppers are taking their time to make an offer—if they make one at all.
What wasn’t up was the number of new listings, which decreased by 16% for the week ending Dec. 10 compared with a year ago. This marks 23 weeks in a row that sellers declined to add fresh listings to the housing supply. Many would-be sellers don’t want to give up their low mortgage rates by selling their homes and having to get new loans to purchase their next properties.
“As new listings dwindle, rising inventory signals that the pullback in demand is even larger,” says Hale.
Indeed, homes lingered on the market 10 days longer for the week ending Dec. 10 compared with the same time last year. And smart sellers entering the market will want to take note of the rising number.
“Homeowners seeking to sell in this market will need a dose of patience to go along with a smart pricing strategy that takes local market conditions into account,” adds Hale.
Is it better to buy in 2022 or 2023?
As the housing market resets in response to inflation, buyers are finally regaining the upper hand. But for how long remains to be seen.
Over the past year, mortgage rates reacted to the Federal Reserve’s efforts to bring inflation under control. When the Fed raised its rates, mortgage rates followed the upward trend. And chair Jerome Powell indicated at the Fed’s latest meeting there was still work to do to tame inflation, which suggests that “short-term rates will remain elevated higher for longer than previously expected,” explains Hale.
And what does that mean for homebuyers in the new year?
“Our expectation for 2023 is that rates will climb higher before falling in the second half of the year,” adds Hale.
Hale also predicts that the number of homes for sale in 2023 will be “relatively low.”
Author: Margaret Heidenry
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