Learn the answer to the question on everyone’s mind: Will real estate prices go down this year?
Will real estate prices go down? Brian Icenhower offers his insight into the current real estate market.
Lately, with economic concerns (rising mortgage rates, inflation, etc.) we have seen a lot of fear and speculation about housing prices. That’s persisted throughout the second and third quarter of 2022. But, in the past several months, I have seen some really increased and enhanced attacks on real estate values. You’ll always hear about me talk about the two real estate markets.
A tale of two markets
ICYMI, there are two different markets. First, there’s sales volume, which has definitely slowed down nationwide. There are fewer sales, and therefore less sales volume. We are projecting to be off by about 20% this year as a country. Second, home prices, albeit, have slowed, but they continue to go up year over year. However, there are exceptions to this all over the place, for different reasons. But, for the most part, house appreciation has been well above average for 2022.
This is why you need to watch the media headlines. “The Housing Market is Crashing” means nothing without context, because they don’t specify which market.
Will real estate prices go down?
Recently, there has been a very sustained attack on housing prices and home values, not just real estate sales volume. That comes in a form that we haven’t seen since the 1980s, which is over 40 years ago. Back then, the attack was brought on by Alan Greenspan, who was the Federal Reserve Chairman when Ronald Reagan was present.
Now we have Chairman Jerome Powell. The president wants a strong economy — which all presidents do — so he can get re-elected. Contrary to what the president wants, Chairman Powell just came out and said that he is going to take housing prices down to make it more affordable for people.
This is a tale of two markets. Will real estate prices go down? We don’t know, but we do know that the Fed is trying to make that happen.
Brian Icenhower
Whether you agree with that or not, it doesn’t matter. The point of the matter is that we are trying to read what the Federal Reserve Chairman is doing and understand how it will impact our lives and our livelihood. I’ll tell you that Greenspan said the same thing in the 80s and he was unable to follow through and take housing prices down.
Will real estate prices go down? I don’t know. We can’t be sure that Powell will succeed, either, but it looks like he will try.
Are interest rates going to continue to rise?
When it comes to interest rates, I think those will definitely continue to climb. Where we are right now with rates is nothing compared to where we will be with inflation. I do expect them to climb to at the very least 8.5%, which is the 40 year average. I know that will scare people, but trust me, life goes on. Sales will still happen. People will accept it and deal with it. It’s just a new conversation to have with clients and it’s something we aren’t used to talking about anymore.
However, rate increases can slow things down a bit. People panic and wait to buy or sell until rates go back down. Once they get used to the current rate, sales pick up again. The reason that rising rates don’t bring prices down is quite simple. Rising rates bring housing supply down.
If you are in a 4% interest rate in your current home, you don’t want to sell and buy your home at 8%. Essentially, a rising rate curbs supply and demand. Since they both decrease, we will see little to no change in appreciation.
Low supply and low demand with rising interest rates
So, will real estate prices go down thanks to Chairman Powell? There’s a really good chance that Chairman Powell doesn’t succeed because of this very reason. If supply is super low and demand is fairly low, too, appreciation will continue.
Today’s shoppers generally have more homes to consider than last year’s shoppers did, but the market is still not back to pre-pandemic inventory levels. In fact … the active listings count still trails its 2020 and 2019 levels by more than 7% and 43%, respectively.
Danielle Hale, Chief Economist, realtor.com
Housing supply is still very, very low. Appreciation was at around 20% in 2021. All the leading experts are saying we can still expect appreciation at 10-15% this year. Understand, we are also still looking at home prices going up, they just aren’t going up as fast. You will see certain micro-markets where prices are not increasing.
You are seeing a lot of click-bait right now in the media, claiming prices are dropping. Understand that they are looking at data month over month, not year over year. As a result, this gets confusing for the public.
Monthly Home Prices graphic answers the question, “Will real estate prices go down?”
We created a graphic that helps you to see the full picture. “Monthly Home Prices” shows the median home price in thousands. It also shows the seasonality of home prices. There is a ripple effect, even in a housing boom where things are skyrocketing. There are still prices declining month over month as we go into fall and winter.
Check out the graphic below. And, if you scroll down to the bottom of this blog, you can download the PDF of the Monthly Home Prices infographic for free by subscribing.
Housing prices go down at this time of year — every year. They go down because luxury homes usually pull off the market because they can afford to wait until Spring (the peak season to sell). Because the luxury homes pull out, it brings the median home price sold down significantly.
Homes are still selling fast
Even in the worst markets, home prices around the median sales price are always hot. The only time they haven’t been hot is when new homes start pricing below median home prices. When new home construction, in the past, has oversupplied the market, this has happened. This happened in the Great Depression and the Great Recession. The cost to build is so much higher than it used to be, so we don’t see this issue happening today.
I hope this gives you some healthy perspective and answers the question, “Will real estate prices go down?” Home prices are getting back to the same rate of appreciation that we experienced pre-pandemic. Those were still great years. We had a healthy, above-average appreciation. And, the inventory lends itself to a hot seller’s market!
It’s really simple. The formula for success is: lead generate. It’s time to roll up your sleeves and get to work.
Brian Icenhower
So, what should you do now?
Get back to business. Keep doing the activities you need to do to generate more business.
Agents who don’t know how to lead generate are going to starve or quit. Success or failure is your choice! It is within your power to put your head down and work.
It’s really simple. The formula for success is: lead generate. It’s time to roll up your sleeves and get to work.
FREE DOWNLOAD: Monthly Home Prices Infographic
This Monthly Home Prices Infographic is free today for subscribers. This graphic shows the ebb and flow of housing prices. You can clearly see that prices continue to increase, year over year, and you can also see the seasonality that allows for moth over month decreases.
Want to learn more?
- Read The High-Performing Real Estate Team. You can buy Brian Icenhower’s best-selling book on Amazon.
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