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Many people are wondering: will home prices fall this year? Whether you’re a potential homebuyerseller, or both, the answer to this question matters for you. Let’s break down what’s happening with home prices, where experts say they’re headed, and how this impacts your homeownership goals.

What’s Happening with Home Prices? 

Home prices have seen 121 consecutive months of year-over-year increases. CoreLogic says:

Price appreciation averaged 15% for the full year of 2021, up from the 2020 full year average of 6%.”

So why are prices climbing so much? It’s because there are more buyers than there are homes for sale. This imbalance is expected to maintain that upward pressure on home prices because homes for sale are a hot commodity in today’s low-inventory housing market.

Where Do Experts Say Prices Will Go from Here?

Experts say the housing market isn’t set up for a price decline due to that ongoing imbalance between supply and demand. In the latest home price forecasts for 2022, they’re calling for ongoing appreciation throughout the year (see graph below):

Will Home Prices Fall This Year? Here’s What Experts Say | MyKCM

While the experts are forecasting more moderate price appreciation, the 2022 projections show price gains will remain strong throughout this year. First American explains it like this:

While house price growth is expected to moderate from the rapid pace of 2021, strong home buyer demand against a backdrop of historically tight inventory of homes for sale will likely keep appreciation positive in the coming year.”

What Does That Mean for You?

The biggest takeaway is that none of the experts are projecting depreciation. If you’re a homeowner thinking about selling, the higher price appreciation over the last two years has been great for your home’s value, but it’s also something you should factor in when planning your next steps. If you’ll also be buying a home after selling your current house, you shouldn’t wait for prices to fall. Waiting will only cost you more in the long run because climbing mortgage rates and rising home prices will have an impact on your next home purchase. Freddie Mac says:

“If you’re thinking about waiting until next year and that maybe rates are higher, but you’ll get a deal on prices – well that’s risky. It may be more advantageous to purchase this year relative to waiting until 2023 at this time.”

Bottom Line

If you’re thinking of selling to move up, you shouldn’t wait for prices to fall. Experts say prices will continue to appreciate this year. That means, if you’re ready, buying your next home before prices climb further may make the most financial sense.

Let’s kick off this month discussing some of the biggest topics in real estate today.

is the market going to crash? what about home prices? affordability?

Are we in a housing bubble?

This shows home values going all the way back to World War II. And if you think about that, the reason we go back to World War II is that was the start of the modern day housing boom here in this country. If you think about GIs coming back from the war and the GI Bill provided for education, provided for them to go out and buy a home. And ever since then, up until today, there’s been one time in this country where homes lost significant value and that was back in 2008. So back in 2008 we saw homes lose value really for two reasons. First reason, loose lending standards. You think back then, no income, no job, no verification and we know how that ended up. The second reason was cash out refinances. People took the equity they had, cashed it out, bought jet skis and went on vacation, the financed lifestyle. Did things thinking this will never end and it ended poorly. So let’s recap there. Apply for a loan that you don’t have to qualify for and then you take your equity and you cash it out and that’s what ended up in 2008 when homes lost value.   http://www.econ.yale.edu/~shiller/data.htm

Let’s take a look at home values going all the way back to World War II – the start of the modern day housing boom in the United States. Notice that 2008 was the only time homes lost significant value, and this is really for two reasons. First, loose lending standards – lack of income verification, lack of job verification, etc. Second, cash out refinances – people took the equity they had, cashed it out, and bought depreciating assets. In these times people were able to apply for a loan they didn’t qualify for, and then borrow against the equity.

First, the forbearance numbers continue to edge downward. As of the most recent numbers in April, 690,000 loans still in forbearance, well below where we started out of May of 2020.  https://www.blackknightinc.com/blog-posts/forbearance-plans-edge-higher/?

All that said, this market is different. First, the forbearance numbers continue to edge downward. As of last month, there are 690,000 loans still in forbearance – well below where we started out in May of 2020. According to Black Knight, 92% of the people that entered forbearance have come out of it.

One of the latest statistics that’s come out is 92% of the people that entered forbearance have come out of it, according to Black Knight. And those that have come out, as of March 31st, here’s the clearest picture. Thirty-seven percent in the green area were paid in full. Those are the ones that took forbearance maybe as an insurance policy and said I don’t know what’s going to happen and they didn’t need it. Forty-four point six, the blue shaded area, went through some kind of work out with their bank, either a modification, a rate and term refinance or a deferral. They tacked it on the back. Four out of five people either went through a modification or paid it off in full and there were no issues. That’s a very, very positive sign. Now, there are 18% that are still in some sort of trouble. We don’t know. They have no loss mitigation plans or they’re already into the loss mitigation plan.  https://www.mba.org/news-research-and-resources/newsroom

Thirty-seven percent were paid in full – those that likely took forbearance as an insurance policy and didn’t need it. Forty-four percent went through some kind of modification, refinance, or deferral – tacking it on the back end. So, 4 out of 5 people exited forbearance – a very positive sign. However, there are 18% that are still in jeopardy – they have no loss mitigation plan or are already into the loss mitigation plan. But let’s not forget that people have options today – you can sell your home with the appreciation we’ve seen over the last couple of years.

We have learned from history that prices can fall. The more important question is if it’s going to happen right now. And that’s hard to say.   Danielle Hale, Chief Economist, realtor.com
Lending standards are nothing like they were in the early 2000s. We talked about the things that people had done that caused the crisis. Well, there’s two components that this report by the urban institute outlined. First, is produce risk in the mortgage business and second is borrower risk. product risk. Think about that as the types of loans that are available to people. And that’s been virtually eliminated. If you start back in1999, we’re talking about all the way to 2021. product risk is not there. The loans that were available back then are not available today. borrower risk. Think about that as asset profile, credit score, all the thing that it takes to qualify for a loan and those have been severely curtailed. It’s gotten harder to qualify for a loan after the housing crisis. That’s when the qualified mortgage came out and demonstrate the ability to repay, all the things that we know about the mortgage business about how hard it’s gotten to qualify. This graphic tells the story of the differences today between back then.   https://www.urban.org/policy-centers/housing-finance-policy-center/projects/housing-credit-availability-index

Second, the lending default risk is lower. The Urban Institute looked at Default Risk in the Mortgage Market and that helps us see how lending standards are nothing like they were in the early 2000s. There is product risk and borrower risk. The loans that were available back then are not available today. When looking at the borrower risk, think about asset profiles, credit scores – all of those things needed to qualify for a loan – have been curtailed. It’s gotten harder to qualify for a loan. Now we have to demonstrate the ability to repay.

the foreclosure market is an all-time low. Now, the last couple of years certainly there’s been a moratorium in place and the federal government has stepped in and said, look, we’re not going to process these foreclosures during the pandemic. [00:07:03) And those are coming back and we’ve talked about that on the monthly market report. But back during the housing crisis, over nine million people went through foreclosure.   https://www.attomdata.com/news/market-trends/foreclosures/attom-q1-2022-u-s-foreclosure-market-report/ https://www.attomdata.com/news/market-trends/foreclosures/attom-year-end-2021-u-s-foreclosure-market-report/

Third, the foreclosure market is an all-time low – from a high of about 3 million homes in foreclosure to 78,000 last quarter.

Tighter lending standards have led to less foreclosures in the market. Now, that makes a lot of sense, right? If you have a highly qualified or a better qualified borrower, you’re going to see less defaults and we’re seeing exactly that. That certainly is not going to play into a crash. If you needed a further example of that, this is a look at the loans that have been given to people with a credit score less than 620. So, again, go back to the housing crisis. So many loans – this is in volume in billons of loans with a credit score less than 620. And where do we stand as the third quarter of 2021, the most recent information from the Federal Reserve, a fraction of where we were back then. So we can clearly say lending standards are different. That story is different. One of the major contributors back in 2008 is not around.   https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/xls/HHD_C_Report_2021Q3.xlsx

Fourth, lending standards are tighter which can be attributed to less foreclosures in the market. Qualified buyers mean less defaults. During the crisis we saw about 4 times the amount of loans approved for individuals with a credit score less than 620.

The other question though a lot of people bring up is well, as homes get expensive, as homes have risen, people aren’t going to be able to support that debt and that’s a challenge. Well, mortgage debt is not a challenge. Again, this is from the Federal Reserve. This is the household debt service ratio for mortgages and that’s as a percentage of disposal personal income.  https://fred.stlouisfed.org/series/MDSP

Fifth, mortgage debt is not a challenge. According to the Federal Reserve, the household debt ratio is the lowest it has been since the 1970s. Why? Because of rising wages. Today, we are much better positioned than we were back in the financial crisis.

Finally, cash out refinances are extremely low. The difference in annual mortgage payments for cash out refinances was over $3,000 and $4,000 back during the housing crisis, while we hover around the $34 mark right now. There is very little change in the mortgage payment as somebody goes through a cash out refinance.

We learned a lot of lessons during the housing crash, and can see how the market dynamics are very different today. So, what is to come in the remainder of 2022? The Fed started off the month by raising the Fed funds rate. How will this affect home prices?

MBA: https://www.mba.org/docs/default-source/research-and-forecasts/forecasts/mortgage-finance-forecast-apr-2022.pdf NAR: https://cdn.nar.realtor/sites/default/files/documents/forecast-q2-2022-us-economic-outlook-04-27-2022.pdf Fannie Mae: https://www.fanniemae.com/media/43346/display Freddie Mac: https://www.freddiemac.com/research/forecast/20220418-quarterly-forecast-purchase-market-will-remain-solid-even-mortgage-rates-rise HPES: https://pulsenomics.com/surveys/#home-price-expectations CoreLogic: https://www.corelogic.com/intelligence/u-s-home-price-insights/            Zelman: https://www.zelmanassociates.com/

Looking at the most recent updated home price forecast from the top seven forecasters, we see 9% appreciation for 2022.

The most recent updated home price forecast from the seven forecasters that we watch, these are for 2022 prices, average of these forecasters is 9% appreciation. Many people are saying are homes going to lose value later in the year? Certainly not what experts are saying for this year. If you see these experts, they start to fall between 8 and 10%. We started off the year at about 5% appreciation and we’ve risen slowly each month since then. We said these forecasters had a bias to the upside, meaning they were raising their forecast and we’re certainly seeing that today.   https://pulsenomics.com/surveys/#home-price-expectations

Beyond 2022, we will see a much more normal rate of appreciation like the pre-pandemic rate of 3.8%.

What the home price expectation survey does as well is they look at cumulative house of price appreciation by 2026. If we look at these, they sort of rank them by the optimist, the pessimist, and then the average of all panelists in the middle. Optimists say 46.5% appreciation. Pessimists, 10% appreciation. All the panelists, 26% appreciation by 2026. So, depending on where you sit, I think even if you’re a pessimist in this market, they’re calling for appreciation here between now and 2026.   https://pulsenomics.com/surveys/#home-price-expectations

The home price expectation survey forecasts 26% cumulative home price appreciation by 2026.

... the 30-year fixed mortgage will likely peak at between 5.0% and 5.7%. There is some variability in the relationship, so we might see rates as high as the low 6% range.  Bill McBride, Author, Calculated Risk

As buyers search for homes, we’ve seen interest rates in the first four months of this year rise dramatically. We started the year about 3.1%, and now we’re just over 5.25% on the average 30 year fixed.

New data from the Harris Poll show 84% of Americans plan to cut back spending as a result of price spikes… More than 70% of respondents said they’re feeling the effects of inflation the most in gas prices and groceries.   Bloomberg

Prices are rising all around us, and that is affecting affordability.

Looking at the change in mortgage payment going back to January of 2021. This is based on a loan amount of $300,000 principle and interest only. But if you look at January of 2021, mortgage rates were at historic lows. A typical mortgage payment was about $1,200, a little north of that. Fast-forward to where we are today in this rising mortgage rate environment, and things are different. If we think about where mortgage rates are projected to go and let’s say mortgage rates later this year are around 5.5% as we look at what the experts are saying and what’s projected to happen, that mortgage payment jumps up to over $1,700. if you’re talking about $1,200 to $1,700, that’s roughly a $500 difference.   https://www.freddiemac.com/pmms https://www.mortgagecalculator.net/

Consider a loan amount of $300,000 (principle and interest only). In January 2021, your monthly payment would have been about $1,200. Fast forward to today’s rates, and you are looking at about $1,650 a month for the same home. Projections have this payment increasing by about $500 within the next few months.

The Housing Affordability Index. It goes all the way back to 1990. And if you follow along with us, you’ve definitely seen this before, but really had to break this down and look at it. Is that the higher the bar, the more affordable homes are. If you look at where we are over on the right today at 135.4, that’s the index that NAR is measuring here. Homes are not as affordable as they were over the past 10 or 12 years, and certainly not as affordable as they were in those orange bars, which was the housing crisis. That’s when distressed properties dominated the market. Homes are being sold at a massive discount. We’re certainly not there but as we’ve seen prices rise, mortgage rates rise, homes are not as affordable as they were even over the past couple of years. It’s important to remember that affordability is really a measure of three key things. We mentioned prices and mortgage rates, but it’s also wages. Right now, all three of those things are ticking up but historically, over the past couple of years, mortgage rates have kind of offset some of the rising prices. Well, we’re not sitting in that seat anymore so people are feeling affordability challenges.   https://www.nar.realtor/blogs/economists-outlook/ https://www.nar.realtor/blogs/economists-outlook/housing-affordability-declines-in-february

The Housing Affordability Index shows that homes are more affordable than any time leading up to the housing crisis. So, when people say homes aren’t affordable anymore, we have to ask, “As compared to when?”

With a limited number of homes for sale today and so many buyers looking to make a purchase before mortgage rates rise further, bidding wars are common. According to the latest report from the National Association of Realtors (NAR), nationwide, homes are getting an average of 4.8 offers per sale. Here’s a look at how that breaks down state-by-state (see map below):

Things That Could Help You Win a Bidding War on a Home | MyKCM

The same report from NAR shows the average buyer made two offers before getting their third offer accepted. In this type of competitive housing market, it’s important to know what levers you can pull to help you beat the competition. While a real estate professional is your ultimate guide to presenting a strong offer, here are a few things you could consider.

Offering over Asking Price

When you think of sweetening the deal for sellers, the first thought you likely have is around the price of the home. In today’s housing market, it’s true more homes are selling for over asking price because there are more buyers than there are homes for sale. You just want to make sure your offer is still within your budget and realistic for the market value in your area – that’s where a local real estate professional can help you through the process. Bankrate says:

Simply put, being willing to pay more money than other buyers is one of the best ways to get your offer accepted. You may not have to increase it by a lot — it’ll depend on the area and other factors — so look to your real estate agent for guidance.”

Putting Down a Bigger Earnest Money Deposit

You could also consider putting down a larger deposit up front. An earnest money deposit is a check you write to go along with your offer. If your offer is accepted, this deposit is credited toward your home purchase. NerdWallet explains how it works:

A typical earnest money deposit is 1% to 2% of the home’s purchase price, but the amount varies by location. A higher earnest money deposit may catch a seller’s attention in a hot housing market.”

That’s because it shows the seller you’re seriously interested in their house and have already set aside money that you’re ready to put toward the purchase. Talk to a professional to see if this is something you can do in your area. 

Making a Higher Down Payment 

Another option is increasing how much of a down payment you’re going to make. The benefit of a higher down payment is you won’t have to finance as much. This helps the seller feel like there’s less risk of the deal or the financing falling through. And if other buyers put less down, it could be what helps your offer stand out from the crowd.

Non-Financial Options To Make a Strong Offer

Realtor.com points out that while increasing these financial portions of the deal can help, they’re not your only options:

. . . Price is not the only factor sellers weigh when they look at offers. The buyer’s terms and contingencies are also taken into account, as well as pre-approval letters, appraisal requirements, and the closing time the buyer is asking for.”

When it’s time to make an offer, partner with a trusted professional. They have insight into what sellers are looking for in your local market and can give you expert advice on what levers you may or may not want to pull when it’s time to write an offer.

From a non-financial perspective, this can include things like flexible move-in dates or minimal contingencies (conditions you set that the seller must meet for the purchase to be finalized). For example, you could make an offer that’s not contingent on the sale of your current home. Just remember, there are certain contingencies you don’t want to forego, like your home inspection. Ultimately, the options you have can vary state-to-state, so it’s best to lean on an expert real estate professional for guidance.

Bottom Line

In today’s hot housing market, you need a partner who can serve as your guide, especially when it comes to making a strong offer.

If you’re planning to sell your home this season, rising prices are great news for you. But it’s important to understand why prices are rising to begin with. One major factor is supply and demand.

In any industry, when there are more buyers for an item than there are of that item available, prices naturally rise. In those situations, buyers are willing to pay more to get the product or service they’re looking for when options are scarce. And that’s exactly what’s happening in the current real estate market.

Selma Hepp, Executive, Research & Insights and Deputy Chief Economist at CoreLogic, puts it like this:

With so few homes, buyers are once again left with fierce competition that’s driving the share of homes that sold over the listing price up to 66% . . . With the continued imbalance between supply and demand, home prices are likely to have another year of strong gains and are expected to average about 10% growth for the year.”

Because it will take some time for housing supply to increase, experts believe prices will continue rising. The latest Home Price Expectations Survey forecasts what will happen with home prices over the next 5 years. As the graph below shows, while the rate of appreciation will moderate over the next few years, prices will continue rising through 2026:

Today’s Home Price Appreciation Is Great News for Existing Homeowners | MyKCM

What This Means When You Sell Your House

If you’re a homeowner, the projection for continued price appreciation this year opens up an opportunity to move. That’s because it may give your equity a major boost. Equity is the difference between what you owe on your house and its market value. The amount of equity you have increases as you make your monthly payments and as rising home prices drive up the market value for your home.

Growing equity is a powerful tool for homeowners. When you sell your house, the equity you’ve built comes back to you in the sale. That money could be enough to cover some (if not all) of your down payment on your next home.

Of course, if you want to know how much equity you have in your current house, it’s crucial to work with a real estate professional. They follow current market trends and can help you understand your home’s value when you’re ready to sell.

What This Means for Your Next Purchase

But today’s rising home values aren’t just good news if you’re ready to sell. Because price appreciation is forecast to continue in the years ahead, you can rest assured your next home will be an investment that should grow in value with time. That’s one of several reasons why real estate has been rated the best investment in a recent Gallup poll.

Bottom Line

If you’re weighing whether or not you should sell your house this season, know rising home values may be opening up an opportunity to use equity to fuel your move.

Even if you haven’t been following real estate news, you’ve likely heard about the current sellers’ market. That’s because there’s a lot of talk about how strong market conditions are for people who want to sell their houses. But if you’re thinking about listing your house, you probably want to know: what does being in a sellers’ market really mean?

What Is a Sellers’ Market?

The latest Existing Home Sales Report from the National Association of Realtors (NAR) shows housing supply is still very low. There’s a 2-month supply of homes at the current sales pace.

Historically, a 6-month supply is necessary for a normal or neutral market where there are enough homes available for active buyers. That puts today deep in sellers’ market territory (see graph below):

What You Need To Know About Selling in a Sellers' Market | MyKCM

What Does This Mean for You When You Sell?

When the supply of houses for sale is as low as it is right now, it’s much harder for buyers to find homes to purchase. That creates increased competition among purchasers which can lead to more bidding wars. And if buyers know they may be entering a bidding war, they’re going to do their best to submit a very attractive offer upfront. This could drive the final price of your house up.

And because mortgage rates and home prices are climbing, serious buyers are motivated to make their purchase soon, before those two things rise further. That means, if you put your house on the market while supply is still low, it will likely get a lot of attention from competitive buyers.

Bottom Line

The current real estate market has incredible opportunities for homeowners looking to make a move. Listing your house this season means you’ll be in front of serious buyers who are ready to buy.

Homeownership has become a major element in achieving the American Dream. A recent report from the National Association of Realtors (NAR) finds that over 86% of buyers agree homeownership is still the American Dream.

Prior to the 1950s, less than half of the country owned their own home. However, after World War II, many returning veterans used the benefits afforded by the GI Bill to purchase a home. Since then, the percentage of homeowners throughout the country has increased to the current rate of 65.5%. That strong desire for homeownership has kept home values appreciating ever since. The graph below tracks home price appreciation since the end of World War II:

Why This Housing Market Is Not a Bubble Ready To Pop | MyKCM

The graph shows the only time home values dropped significantly was during the housing boom and bust of 2006-2008. If you look at how prices spiked prior to 2006, it looks a bit like the current spike in prices over the past two years. That may lead some people to be concerned we’re about to see a similar fall in home values as we did when the bubble burst. To help alleviate those worries, let’s look at what happened last time and what’s happening today.

What Caused the Housing Crash 15 Years Ago?

Back in 2006, foreclosures flooded the market. That drove down home values dramatically. The two main reasons for the flood of foreclosures were:

1. Many purchasers were not truly qualified for the mortgage they obtained, which led to more homes turning into foreclosures.
2. A number of homeowners cashed in the equity on their homes. When prices dropped, they found themselves in an underwater situation (where the home was worth less than the mortgage on the house). Many of these homeowners walked away from their homes, leading to more foreclosures. This lowered neighboring home values even more.

This cycle continued for years.

Why Today’s Real Estate Market Is Different

Here are two reasons today’s market is nothing like the one we experienced 15 years ago.

1. Today, Demand for Homeownership Is Real (Not Artificially Generated)

Running up to 2006, banks were creating artificial demand by lowering lending standards and making it easy for just about anyone to qualify for a home loan or refinance their current home. Today, purchasers and those refinancing a home face much higher standards from mortgage companies.

Data from the Urban Institute shows the amount of risk banks were willing to take on then as compared to now.

Why This Housing Market Is Not a Bubble Ready To Pop | MyKCM

There’s always risk when a bank loans money. However, leading up to the housing crash 15 years ago, lending institutions took on much greater risks in both the person and the mortgage product offered. That led to mass defaults, foreclosures, and falling prices.

Today, the demand for homeownership is real. It’s generated by a re-evaluation of the importance of home due to a worldwide pandemic. Additionally, lending standards are much stricter in the current lending environment. Purchasers can afford the mortgage they’re taking on, so there’s little concern about possible defaults.

And if you’re worried about the number of people still in forbearance, you should know there’s no risk of that causing an upheaval in the housing market today. There won’t be a flood of foreclosures.

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

As mentioned above, when prices were rapidly escalating in the early 2000s, many thought it would never end. They started to borrow against the equity in their homes to finance new cars, boats, and vacations. When prices started to fall, many of these homeowners were underwater, leading some to abandon their homes. This increased the number of foreclosures.

Homeowners didn’t forget the lessons of the crash as prices skyrocketed over the last few years. 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 more than doubled compared to 2006 ($4.6 trillion to $9.9 trillion).

The latest Homeowner Equity Insights report from CoreLogic reveals that the average homeowner gained $55,300 in home equity over the past year alone. Odeta Kushi, Deputy Chief Economist at First Americanreports:

“Homeowners in Q4 2021 had an average of $307,000 in equity – a historic high.”

ATTOM Data Services also reveals that 41.9% of all mortgaged homes have at least 50% equity. These homeowners will not face an underwater situation even if prices dip slightly. Today, homeowners are much more cautious.

Bottom Line

The major reason for the housing crash 15 years ago was a tsunami of foreclosures. With much stricter mortgage standards and a historic level of homeowner equity, the fear of massive foreclosures impacting today’s market is not realistic.

Being intentional and competitive are musts when buying a home this season. That’s why pre-approval is so important today. Pre-approval from a lender is the only way to know your true price range and how much money you can borrow for your loan. Peter Warden, Editor of The Mortgage Reportsexplains:

“The lender will check out your personal finances and issue you a letter confirming the amount you’re eligible to borrow. This not only gives you a firm budget for house hunting, but also lets sellers know you’re qualified to make an offer.”

Why does that matter so much today? There are many more buyers looking for homes today than there are homes available for sale, and that’s creating some serious competition. According to the National Association of Realtors (NAR), the average home is getting 4.8 offers per sale. As a result, bidding wars are still common.

Your pre-approval gives you a leg up in these situations. That’s because you know exactly what you’re approved to borrow before you write your offer, and it lets the seller know you’re qualified to buy their home. This helps both you and the seller feel confident in what you’re bringing to the table. And that puts you in a better position to potentially win a bidding war.

As Warden puts it:

“There’s another important reason to get preapproved, too. And that’s because there are way more buyers than homes in today’s market — which means you need to be ultra-prepared if you want to win a bidding war. Most sellers are getting multiple offers right now. And most won’t even entertain an offer without a preapproval letter included.”

Every advantage you can gain as a buyer is crucial in a market that’s constantly changing. Mortgage rates are rising, home prices are going up, and lending institutions are regularly updating their standards. You’re going to need guidance to navigate these waters, so it’s important to have a team of professionals, such as a loan officer and a trusted real estate advisor, on your side. They’ll help make sure you’re ready to put your best foot forward.

Bottom Line

Getting pre-approved for a mortgage helps you better understand what you can afford and signals to sellers you’re serious about purchasing their home.

If you’re thinking of selling your house, it may be because you’ve heard prices are rising, listings are going fast, and sellers are getting multiple offers on their homes. But why are conditions so good for sellers today? And what can you expect when you move? To help answer both of those questions, let’s turn to the data.

Today, there are far more buyers looking for homes than sellers listing their houses. Here are the maps of the latest buyer and seller traffic from the National Association of Realtors (NAR) to help paint the picture of what this looks like:

On the Fence of Whether or Not To Move This Spring? Consider This. | MyKCM

Notice how much darker the blues are on the left. This shows buyer traffic is strong today. In contrast, the much lighter blues on the right indicate weak or very weak seller traffic. In a nutshell, the demand for homes is significantly greater than what’s available to purchase.

What That Means for You

You have an incredible advantage when you sell your house under these conditions. Since buyer demand is so high at a time when seller traffic is so low, there’s a good chance buyers will be competing for your house.

According to NAR, in February, the average home sold got 4.8 offersWhen buyers have to compete with one another like this, they’ll do everything they can to make their offer stand out. This could play to your favor and mean you’ll see things like waived contingencies, offers over asking price, earnest money deposits, and more. Selling when demand is high and supply is low sets you up for a big win.

If you’re also looking to buy a house, you may be tempted to focus more on just the seller traffic map and wonder if it means you’ll have trouble finding your next home. But remember this: perspective is key. As Danielle Hale, Chief Economist at realtor.comsays:

The limited number of homes for sale is a lesson in perspective. This same stat that frustrates would-be homebuyers also means that today’s home sellers enjoy more limited competition than last year’s home sellers.”

If you look at the big picture, the opportunity you have as a seller today is unprecedented. Last year was a hot sellers’ market. This year, inventory is even lower, and that means an even bigger opportunity for you. Even though finding your next home in a market with low inventory can be challenging, is that concern worth passing on some of the best conditions sellers have ever seen?

As added peace of mind, remember real estate professionals have been juggling this imbalance of supply and demand for nearly two years, and they know how to help both buyers and sellers find success when they move. A skilled agent can help you capitalize on the great opportunity you have as a seller today and guide you through the buying process until you find the perfect place to call your next home.

Bottom Line

If you’re ready to move, you have an incredible opportunity in front of you today. Trust the experts.

Many consumers are wondering what will happen with home values over the next few years. Some are concerned that the recent run-up in home prices will lead to a situation similar to the housing crash 15 years ago.

However, experts say the market is totally different today. For example, Odeta Kushi, Deputy Chief Economist at First American, tweeted just last week on this issue:

“. . . We do need price appreciation to slow today (it’s not sustainable over the long run) but high price growth today is supported by fundamentals- short supply, lower rates & demographic demand. And we are in a much different & safer space: better credit quality, low DTI [Debt-To-Income] & tons of equity. Hence, a crash in prices is very unlikely.”

Price appreciation will slow from the double-digit levels the market has seen over the last two years. However, experts believe home values will not depreciate (where a home would lose value).

To this point, Pulsenomics just released the latest Home Price Expectation Survey – a survey of a national panel of over 100 economists, real estate experts, and investment and market strategists. It forecasts home prices will continue appreciating over the next five years. Below are the expected year-over-year rates of home price appreciation based on the average of all 100+ projections:

Those responding to the survey believe home price appreciation will still be relatively high this year (though half of what it was last year), and then return to more normal levels over the next four years.

What Does This Mean for You as a Buyer?

With a limited supply of homes available for sale and both prices and mortgage rates increasing, it can be a challenging market to navigate as a buyer. But buying a home sooner rather than later does have its benefits. If you wait to buy, you’ll pay more in the future. However, if you buy now, you’ll actually be in the position to make future price increases work for you. Once you buy, those rising home prices will help you build your home’s value, and by extension, your own household wealth through home equity.

As an example, let’s assume you purchased a $360,000 home in January of this year (the median price according to the National Association of Realtors rounded up to the nearest $10K). If you factor in the forecast for appreciation from the Home Price Expectation Survey, you could accumulate over $96,000 in household wealth over the next five years (see graph below):

The Future of Home Price Appreciation and What It Means for You | MyKCM

Bottom Line

If you’re trying to decide whether to buy now or wait, the key is knowing what’s expected to happen with home prices. Experts say prices will continue to climb in the years ahead, just at a slower pace. So, if you’re ready to buy, doing so now may be your best bet for your wallet. It’ll also give you the chance to use the future home price appreciation to build your own net worth through rising equity.

mortgage rates? home prices? home sales? spring predictions? To help predict what is to come, let’s look at what has happened historically in rising mortgage rate environments.
Mortgage Rates rising this year from 3.11% in January to 4.67% in March. https://freddiemac.gcs-web.com/node/24976/pdf (3.89% previous week)  http://www.freddiemac.com/pmms/

Mortgage rates started out at 3.11% for the average 30-year,fixed at the beginning of the year, and they have just steadily climbed since then – up to 4.67%.

Mortgage rates are likely to continue to move higher throughout the balance of 2022, although the pace of rate increases is likely to moderate.. Much of the increase in rates in early 2022 is in anticipation of what will happen later this year, especially with Federal Reserve interest rate policy. Len Kiefer, Deputy Chief Economist, Freddie Mac

Rates are projected to continue rising, but at a more moderate pace, because the Fed has risen their rate and mortgage rates tend to follow.

So how does this affect home prices? Let’s take a look at the historical impact of rising rates on home prices when mortgage rates rose by more than a percentage point.

So this goes all the way back to October of 1993, so almost 30 years. And it shows you that there was you know, an average of about 8% home price appreciation as mortgage rates are rising by more than a percentage point. So you know, overall what we can see is that you know, rising rates have not had a negative impact on home prices. http://www.freddiemac.com/research/insight/20180223_increasing_mortgage_rates.page

Looking back to October of 1993 (about 30 years), we can see an average of about 8% home price appreciation as mortgage rates are rising by more than a percentage point. So, rising rates have not had a negative impact on home prices.

So how do rising mortgage rates affect home sales?

So let’s take a look at this addition to the same data, and to add some home sales for this same period of time, going all the way back to 1993. Now what we can see here is there was an average of a decrease of 11% in home sales as prices were rising. We know as rates rise that that tends to sometimes reduce buyer activity. It prices some people out of the market.. http://www.freddiemac.com/research/insight/20180223_increasing_mortgage_rates.page

Looking at the same data for the same period of time, we can see an average decrease of 11% in home sales as prices were rising. As rates rise, it can tend to reduce buyer activity – pricing some people out of the market.

October ‘93 to December of ‘94. Mortgage rates increase by 2.38% to a final rate of 9.2%. So let’s be super clear that we’re not looking at a two and a half percent increase in mortgage rates right now. We’re not projected to. And we’re certainly not projected, according to the experts, to get up to 9.2% increase, or 9.2% mortgage rate. So very, very different environment than what we’re talking about. . http://www.freddiemac.com/research/insight/20180223_increasing_mortgage_rates.page

It is important to note that first line (October 1993 to December 1994) where mortgage rates rose 2.38% to a final rate of 9.2%. We are NOT looking at a 2.5% increase in mortgage rates right now. That kind of increase is not in the projections. We are in a very, very different environment than we were back then. We are most likely looking at a 1.5% increase.

So let’s look at the same data and what you can see overall. There’s a little bit of orange. There’s a little bit of black, meaning home sales as mortgage rates are rising in these environments, really negligible impact. So maybe down by 2%, maybe up by 2%. Roughly that 2% impact on home sales as mortgage rates are rising in a similar environment. And of course the outlier is 2005, 2006 which was the lead up to the housing crisis and home sales dropped by 14%. So what we can see here is that when you factor this data out, we start to see that rising mortgage rates don’t have a huge impact on home sales. So you know, why is that? I think one of the big things we have to look at is what is available for sale. We have to look at the inventory component. Because today, what we are seeing is drastically low inventory. . http://www.freddiemac.com/research/insight/20180223_increasing_mortgage_rates.page

In rising mortgage rate environments, there is an overall 2% impact on home sales – a negligible impact – where 2005 & 2006 are the outliers leading up to the housing crisis.

Overall, rising mortgage rates don’t have a huge impact on home sales. Why? Because you have to consider the inventory component. Today, we are seeing drastically low inventory – lower than it was in January of 2021, which was a historical low. Home prices are projected to continue rising, because there just aren’t enough homes for sale. Supply and demand are what drives home price appreciation. So, when you see those headlines saying home sales are softening, it’s not because of rising mortgage rates. It’s because there aren’t enough homes to buy.

When we look at months inventory, and we only have it going back to 2003, 2004 for this series of data. But we have five months of inventory, four and a half months, 4.8 months, you know, we had a very, very different inventory level than what we have today. So when we think about you know, those environments where it looks like oh, 506, you know, 2012, 2013, where there was a little bit of a negative impact on sales. Inventory was very different. . http://www.freddiemac.com/research/insight/20180223_increasing_mortgage_rates.page

When we look at months inventory, historically we had between 4.5 and 5 months inventory on hand – a very, very different inventory level than what we have today.

While higher short-term interest rates will push up mortgage rates, I expect some of this impact to be mitigated eventually through lower inflation... Thus, I expect the 30-year fixed mortgage rate to continue to rise, although we aren’t likely to see the big jumps that occurred over the past few weeks. Nadia Evangelou, Director of Forecasting, NAR

Inflation is driving this increase in mortgage rates, and we can expect it to continue to rise, but it won’t be at as quite a rapid pace as what we’ve seen over the past few weeks.

History suggests that when rates rise, there is an initial bump in home prices as many move quickly to buy a home before rates increase further. But after that period, home prices slow... analysis shows that a 1% increase in mortgage rates results in home price appreciation that is 4 percentage points lower. For instance, a 1% increase in mortgage rates would change home price growth from 11% to 7%. Freddie Mac

Home price appreciation will slow, and mortgage rates will slow some of the frenzy. But, we’re not talking about depreciation. We’re talking about deceleration – appreciation at a more moderate rate.

With rates rising and expected to rise through 2023, it makes sense to obtain a purchase or refinance mortgage if you are in good standing. Len Kiefer, Deputy Chief Economist, Freddie Mac

We hope that all helps explain how the rising mortgage rate environment will affect the other factors in the market, so let’s move on to the forecasts for the spring housing market.

We keep watching for it... but there are absolutely no signs of a market slowdown anywhere in the data. If anything, we're seeing the market continue to heat up. Altos Research

We are in a very, very busy market.

https://www.nar.realtor/research-and-statistics/research-reports/realtors-confidence-index

Here is the NAR (National Association of Realtors®) Buyer Traffic Map – strong activity overall.

https://www.nar.realtor/research-and-statistics/research-reports/realtors-confidence-index

Then, we see very, weak seller traffic overall. So, strong buyer demand combined with the lack of sellers keeps that upward pressure on prices.

, active listings increased in this country for the first time in six months. If you go back to the fall of last year, around September we started to kind of fall down in active listings, all those being consumed by the buyers in the market. And we’re starting to see a tick up. Very little, but, but nonetheless a tick up. [0:13:47] And the interesting thing is if you look at where we’re at March, 382,000 active listings in the country according to realtor.com. Remember, they factor out all the pending listings and things like that. These are just actives. And go back to March of last year, about 471 active listings, just shy of 100,000 active listings short this March as compared to last year. So we need more listings. We know that across the country. But all of this leading to sort of a bias towards the upside, meaning forecasters that are looking at the market are saying you know what? We thought it was going to be this amount of activity. But we see it being a little bit more. https://www.realtor.com/research/data/

However, we did see increased active listings in March.

Now, more industry insiders are throwing out their previous forecasts and replacing them with more bullish short-term outlooks. Indeed, some experts say the 2022 spring housing market might go down as one of the most competitive on record. Lance Lambert, Editorial Director, Fortune
a good synopsis of pending home sales over the last, several months. Pending home sales have dropped. And I’m going to make the argument that pending home sales are down not because there’s a lack of demand in the market. https://www.nar.realtor/newsroom/pending-home-sales-dwindle-4-1-in-February https://www.nar.realtor/blogs/economists-outlook/pending-home-sales-weaken-4-1-in-february-2022

Pending home sales have dropped, overall – not because there’s a lack of demand in the market, but because we can’t sell what we don’t have. Nonetheless, we seem to be in a healthy market.

We’re ahead in showings and activity, those scheduling appointments to see homes, and we were well ahead before the pandemic and well ahead during the pandemic. So the lack of existing home sales is not because there’s not demand in the market. There’s very much a strong, strong demand in the market. It’s because of the lack of available homes. All of this, keeping that upward pressure on prices.. https://www.showingtime.com/blog/february-2022-showing-index-results/

We’re ahead in showings and activity, indicating, again, strong demand.

This is the latest look from CoreLogic on price acceleration. You know, as we came through last year we said okay, prices seem to have peaked if not, you know, plateaued. And what we’re seeing through November, December, now January numbers ratcheting up slightly in the amount of appreciation year over year. So a very, very competitive market.https://www.corelogic.com/intelligence/u-s-home-price-insights/

Price acceleration is also holding steady, indicating a very competitive market.

Last fall we observed that home prices, although continuing to rise quite sharply, had begun to decelerate. Even that modest deceleration was on pause in January. The 19.2% year-over-year change for January was the fourth-largest reading in 35 years of history. Craig J. Lazzara, Managing Director, S&P DJI

And we are still ahead of historical appreciation. Overall, these figures look to a strong spring market.

With all the uncertainty out there, let’s take a quick glance at 5 graphs that break down the most common concerns.

First one, active listings. Our new listings are greater than active listings. This does a great job. This graphic here shows active listings as compared to new listings going back to August of 2021. So let me break this down for you. The blue are active listings each month, and the green are new listings that are taken during the month. Well, you see, all through the fall and coming into the new year, active listings outpace the new listings until March, where new listings actually outpace the active listings. What does that do? That shows a great sort of picture of what’s happening in real estate today. As soon as something comes on the market, it sells. It sells right away. And you can see that here in the March look at new listings outpacing the active listings in the market. https://www.realtor.com/research/data/

First, active listings as compared to new listings going back to August of 2021. The light blue bars represent active listings each month, and the dark blue bars represent new listings that are taken during the month. Active listings outpace new listings until March, where new listings actually outpace the active listings. This means as soon as something comes on the market, it sells.

the single-family housing units completed. And this tells the story of why it’s so hard to find a home right now. Why prices have risen the way they’ve risen. And the simple answer is right there. For 14 straight years, we’ve been below the 50-year average in builds in this country, going all the way back to the 70s. And what I always tell people is literally back in the 70s and 80s, there were more homes completed in this country than there have been in the last 14 years. The last decade, really. All of that coming out of fallout of the housing crisis in 2008. Builders being hit extremely hard, and having to build back slowly their capacity, their ability to bring new builds to market. But that no doubt, the lack of available homes coming to market, has constricted supply. A lot of people want to buy, driving the price up, making it hard to find a home. www.census.gov/construction/nrc/xls/co_cust.xls

Second, the single-family housing units completed tells the story of why it’s so hard to find a home right now – why prices have risen the way they’ve risen. And the simple answer is that for 14 straight years, we’ve been below the 50-year average in new construction, due to the fallout of the housing crisis in 2008. Builders were hit extremely hard, and are building back their capacity – their ability to bring new builds to market. This has constricted supply.

The other issue I think is going to be a big concern for a lot of consumers this spring is inflation. This is a graphic you’ve probably seen before. This is home ownership as a hedge against inflation, and that’s what we want to be able to show people literally, when you’re in an inflationary economy, you want to be invested in hard assets that outperform inflation. And this is going back all the way to the 70s. The blue bar there being the inflation rate. The green bar being home price appreciation. And you see most decades, home price appreciation has outperformed inflation. https://cdn.nar.realtor/sites/default/files/documents/2021-11-12-residential-economic-issues-and-trends-lawrence-yun-presentation-slides-11-12-2021.pdf https://www.bls.gov/news.release/archives/cpi_01132021.pdf https://www.corelogic.com/intelligence/find-stories/home-prices-topple-expectations-surging-at-the-end-of-2020/

Third, we look at home ownership as a hedge against inflation. When you’re in an inflationary economy, you want to be invested in hard assets that outperform inflation. The light blue represents the inflation rate, and the dark blue represents home price appreciation. Historically, home price appreciation has outperformed inflation (with the exception of the housing crisis).

https://pulsenomics.com/surveys/#home-price-expectations

Fourth, we look at the home price expectation survey – a survey of 100 economists, real estate professionals, and market investor professionals determining what is going to happen with home prices. $96,000 in potential growth in household wealth over the next five years based solely on increased home equity if you purchased an average priced home (about $360,000).

So, bringing that to people that are wondering, is this the top of the market? Will homes lose value? Will help them see what experts are saying about home price appreciation. You know, all the folks that are waiting on the sideline right now for home prices to go down, this is a look at experts. The experts that we follow. There are seven experts here, on the average home price appreciation being 6.7%. There’s nobody literally right now forecasting prices to go down. You know, one side, Zelman saying 3%. CoreLogic saying 9.6%. And you see everywhere in between there. But no doubt this competitive spring market, this competitive year, we will see home price appreciation. I think they’ll raise this appreciation number as we go throughout the year. But no doubt we’re going to see appreciation in homes this year well above what we’ve seen in historical years. https://www.mba.org/news-research-and-resources/research-and-economics/forecasts-and-commentary https://cdn.nar.realtor/sites/default/files/documents/forecast-Q1-2022-us-economic-outlook-01-27-2022.pdf https://www.fanniemae.com/research-and-insights/forecast http://www.freddiemac.com/research/forecast/20220121_quarterly_economic_forecast.page https://pulsenomics.com/surveys/#home-price-expectations https://www.corelogic.com/intelligence/find-stories/corelogic-hpi-posted-record-year-over-year-growth-in-2021/

Finally, a look at home price appreciation. Among the seven experts, the average home price appreciation is 6.7%. Not one is forecasting prices to go down.

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