Everyone is asking: Will home prices fall this year?
If you’re a potential homebuyer, seller, or both, you probably want to know if home prices will fall too. Let’s take a look at what’s happening with area home prices and where experts say they’re headed. Both could have an impact on your homeownership goals.
Rapid Growth of Home Prices in 2021 was Atypical
In 2021, home prices appreciated quickly. One reason why is that record-low mortgage rates motivated more buyers to enter the market. As a result, there were more people looking to make a purchase than there were homes available for sale. That led to competitive bidding wars which drove prices up. Nationally, price appreciation averaged just over 14% in 2021, up from a 6% average in 2020.
In other words, the pace of appreciation in 2021 far surpassed the 6% the market saw in 2020. And even that appreciation was greater than the pre-pandemic norm which was typically around 3.8% (although the KC Metro had been holding steady around the 6% mark for some time). This goes to show, 2021 was an anomaly in the housing market spurred by more buyers than homes for sale.
Home Price Appreciation Moderates Today
This year, home price appreciation is slowing (or decelerating) from the feverish pace the market saw over the past two years. According to the latest forecasts, experts say that prices will still appreciate by roughly 10% on average nationwide in 2022 (see graph below):
Why do experts agree that prices will continue to rise? It’s simple. Even though housing supply is growing, it’s still low overall thanks to several factors, including a long period of underbuilding homes. Experts say that will keep upward pressure on home prices this year. Additionally, since mortgage rates are higher this year than they were last year, buyer demand has slowed.
As the market undergoes this change, it’s true that price appreciation this year won’t match the feverish pace in 2021. But the rapid appreciation the market saw last year wasn’t sustainable anyway.
What Does That Mean for You?
Today, the market is beginning to move back toward pre-pandemic levels. But even the forecast for 10% home price growth in 2022 is well beyond the 6% that’s more typical for the KC market.
So, despite what you may have heard, experts say home prices won’t fall in most markets. They’ll just appreciate more moderately.
If you’re 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. That means your home should still grow in value, just not as fast as it did last year.
If you’re thinking of making a move, you shouldn’t wait for prices to fall. Experts say, 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, contact LeaderOne Financial Roller Mortgage Team and we will refer you to a realtor who is an expert in our local market. You deserve the best.