When Will Home Prices Come Down?
As the market continues to shift (in the North Okanagan communities of Armstrong, Vernon, across BC, and elsewhere, more and more questions are being asked about how home prices will behave in the coming months. Will home prices continue to rise, or will they finally start to come down? If you’ve been interested in selling your home and/or buying a new one but have been intimidated by the fast-moving market, you’re in the right place. This post will explore real estate market conditions and when we may start to see home prices drop.
Rising Interest Rates: What They Mean for the Real Estate Market
The cost of buying a home peaked in April of this year compared to last year.
The red-hot real estate market conditions were caused by a few factors, including the Covid-19 pandemic and ensuing Great Resignation, limited inventory, and historically low interest rates. Interest rates are now on their way back up — while this may not sound like the best news for home sellers or home buyers, it does mean the market has started to settle. In fact, rates are expected to rise to 5.7% by the end of the year. These increased costs are putting pressure on the housing market.
According to the Mortgage Bankers Association, there has already been a steep drop in mortgage applications. The drop was so significant that it pushed the market index down to its lowest level since 2000.
About 20% of home sellers dropped their prices during the month of May, but that doesn’t signify a serious shift in the market quite yet. Although the real estate market conditions are cooling, that doesn’t mean you can expect significant drops in home prices overnight. Most experts agree it will be at least 2023 before we see home prices drop.
Will the Housing Market Crash?
There have been a lot of murmurings online and in social circles that we may be heading towards another 2006-style housing market crash. Most experts are not anticipating this kind of “bubble burst.”
Instead, Capital Economics predicts we’ll see a 5% drop in home price growth by the middle of next year. Then, they expect a gradual recovery to happen to 3% annual price growth by the end of 2024.
Should I Wait for Real Estate Market Conditions to Improve?
Since there are no signs of a bubble or any kind of chaotic downturn in the housing market, if you are interested in selling your home, you should not wait. Start the process now! Remember, there’s a lot that goes into selling a home — getting it deep cleaned, de-cluttered, and staged, fixing broken appliances and cosmetic issues, finding a real estate agent, listing the home, preparing the home for showings, having an inspection and appraisal and fixing issues these processes find — and the list goes on.
If that list seems excessively long, it’s because the process can be arduous. So, there’s no need to wait. Get ahead of it and get started now! As the market slows down, it is taking longer for homes to sell — they are still selling fast, but we’re not seeing people lined around the block, and multiple above-asking price cash offers roll in like we were a few months ago.
If you’re a home seller, it’s also important to list your home ASAP before the real estate market conditions change and prices drop. This is key so that you can make the highest profit possible on your home. If you wait too long, you risk missing out on full-price offers that will likely be a thing of the past when the market changes later this year and into next.
Spring and summer are also considered the best times of year to sell a home. If you start the home-selling process now, you’ll still have time to capture the market of people looking to move before the new school year. If you wait any longer, you’ll be entering the market during an awkward time of year when many families won’t want to move until at least the holiday break or even the end of the school year.
The bottom line is that continued supply shortages and high buyer demand mean that now is a great time for home sellers to list their homes before prices start dropping significantly as interest rates continue to rise.
We Can Help
Whether you’re a home seller or a home buyer looking to navigate these turbulent real estate market conditions, our team of expert real estate professionals can help. We are skilled at negotiating home prices and working with clients during volatile times.