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Are home prices ever going to come back down to earth? Read on to find out. [[{“value”:”
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In 2021, the housing market pretty much blew up once mortgage lenders started offering up record-low interest rates during the second half of 2020. Because mortgages were so inexpensive, buyers started clamoring to buy homes, driving their prices up significantly.
Since 2022, mortgage rates have been climbing. And it would be fair to classify mortgage rates in 2023 as high compared to recent years, even though historically, they were far from the highest rates ever recorded.
Despite that, home prices rose substantially in 2023. This past December, annual home price growth was measured at 5.5%, according to data from CoreLogic. Not only that, but CoreLogic says that year over year, U.S. home prices have recorded annual gains since early 2012.
If you’re looking to buy a home, you may be wondering when to expect prices to come down. At this point, it may be time to face the reality that, barring a housing market crisis, home values aren’t going to fall a notable degree across the board.
But that doesn’t mean you’re doomed as a home buyer. If you take these steps, you may find that you’re able to find a home that’s affordable to you.
1. Be open to different neighborhoods
If you’re seeking out a home in a desirable neighborhood, expect to pay a premium. It’s that simple. But if you give an up-and-coming neighborhood a chance, you may find that you’re able to get in at the right price before demand soars.
Remember, a lot of the so-called “top” neighborhoods you may be looking at now were, at one point, being developed. Chances are, years ago, home prices in those now-desirable neighborhoods were much lower. If you’re willing to be patient and give a neighborhood time to bloom, you may get in at a reasonable price.
2. Be willing to make cosmetic changes
You may not want to buy a home with structural issues or plumbing or electrical work that isn’t up to code. That could introduce a world of headache — and constitute a huge expense.
But you may want to consider buying a home in sore need of cosmetic work. Some of that work may be reasonably inexpensive to tackle. And you may be equipped to do a portion of it yourself.
Plus, cosmetic changes don’t tend to be urgent, so there’s less pressure to get your home into shape quickly. If you buy a home whose electrical wiring is outdated, that’s a problem — one you’d probably want to address before moving in.
Ugly wallpaper isn’t dangerous — it’s just ugly. So if you’re willing to deal with a home that’s lacking in the aesthetics department, you might manage to pay a lot less money for it. From there, you can beautify it as time and your personal finances allow for.
Don’t give up hope
Unfortunately, home prices might very well keep climbing year after year from this point onward. But that doesn’t mean you won’t ever end up in a position to buy.
Also, while mortgages are pretty expensive to sign at this point, rates have the potential to come down. You shouldn’t anticipate the same record-low rates buyers had at their disposal in 2020 and 2021, but you may find that you’re able to pay a much lower interest rate on a mortgage in a few years from now than what you’d be looking at today. That won’t make a home’s purchase price less expensive — but it’ll make it less expensive for you to borrow to buy that home.
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