Ever daydream about planting a ‘Sold’ sign in front of your current home and jetting off to your next dream house? If so, you’re all too familiar with the emotional whirlwind that the ever-fluctuating housing market can unleash. It’s like a dramatic saga, complete with highs and lows, especially with the rise of home prices, moments of hope, and sprinkles of apprehension that most of us can relate to.
Now, if you’ve been holding off on making that move because you’re biting your nails over the possibility of housing prices taking a nosedive, let’s set the record straight: those prices aren’t plummeting anytime soon. In fact, they’re doing just the opposite. Current stats from multiple reliable sources show a clear upward trajectory in home prices this year alone (check out the graph below for the nitty-gritty).
Understanding the Chart on Home Values
So, you’ve seen the chart, right? In the first half of 2022, it was like the housing market was on an adrenaline rush. I mean, those green bars on the left side of the graph were soaring. It was wild, but let’s be honest, that kind of growth wasn’t going to last forever when we’re talking about the rise of home prices.
Then came the second half of the year. You probably saw headlines about home prices taking a little dip—those red bars weren’t as scary as they looked, though. The media had a field day, and suddenly, folks started to get nervous. I mean, who wouldn’t? But those declines were more like a minor hiccup than a full-blown crash.
Now, let’s talk 2023. Things are looking up again, but it’s more like we’re on a steady hike rather than sprinting up a mountain. Those green bars on the right side of the graph? They’re rising at a pace that feels, well, more “normal.” And let us tell you, after the rollercoaster we’ve been on, some stability feels like a breath of fresh air. It’s a sign that the housing market is settling into a healthier rhythm, and that’s good news for all of us.
Orphe Divounguy, a Senior Economist over at Zillow, sums up the past year of shifting home prices like this:
“The U.S. housing market has surged over the past year after a temporary hiccup from July 2022-January 2023. . . . That downturn has proven to be short lived as housing has rebounded impressively so far in 2023. . .”
As we move forward into this season, you might notice that the skyrocketing home prices start to simmer down a bit. But don’t get it twisted: just because the rate of growth is slowing down doesn’t mean home prices are actually dropping. When you hear media buzz about ‘slower price growth,’ keep in mind that prices are still on the up-and-up, just not as fast. So, don’t let the headlines fool you into thinking it’s a sinking ship—it’s more like a boat gently slowing down, but still moving forward.
Why Are Home Prices on the Rise Again?
The simple answer is: It’s a classic case of supply and demand. You see, we just don’t have enough homes on the market to meet the appetite of eager buyers out there.
But here’s the twist: Even though climbing mortgage rates often make buyers think twice, they also inadvertently shrink the pool of available homes. How? Well, it’s all thanks to what’s known as the “mortgage rate lock-in effect.” When mortgage rates ascend, current homeowners get cold feet about selling. They don’t want to give up their comfy low-rate mortgage only to get stuck with a pricier one when they buy their next place.
So, what we end up with is this interesting tug-of-war. Higher mortgage rates are pulling in opposite directions, affecting both potential buyers and would-be sellers. But at the end of the day, demand still outpaces supply. And as our friends at Freddie Mac have pointed out, this imbalance is exactly why home prices aren’t just holding steady—they’re actually going up.
“While rising interest rates have reduced affordability—and therefore demand—they have also reduced supply through the mortgage rate lock-in effect. Overall, it appears the reduction in supply has outweighed the decrease in demand, thus house prices have started to increase . . .”
What Does This Mean for You?
Hey Buyers: Been on the fence about buying a home because you’re scared the value might plummet? Take a breather. The latest scoop shows that home prices are back on the rise. Investing in a home isn’t just about a roof over your head—it’s an asset that usually appreciates over time. So, it’s kind of like putting your money into a savings account that you can actually live in.
Hey Sellers: Nervous about putting that ‘For Sale’ sign in your yard because you’re unsure about where home prices are headed? Well, it’s time to bust out the champagne. The most recent data shows the housing market’s tilting in your favor. Partnering with a skilled real estate agent could be your next smart move. So, why wait? Your home’s value is likely on the up and up.
The Takeaway
Hesitating to make a move because you’re concerned that home values could drop at any time? The latest stats suggest quite the opposite: property prices are on the rise nationwide. So why not reach out to the McT Real Estate Group? We’d love to give you the lowdown on how the San Diego real estate market is shaping up, helping you make a well-informed decision for your future.