Looking Ahead at the Housing Market

In Lake Carroll Real Estate by Fawnridge Realty, Inc.

Homebuyers entering the housing market this past year were faced with a challenging situation in an already challenging time. While low mortgage interest rates made the finances of buying a home more feasible for many first-time shoppers, it also drove up competition for the limited amount of real estate coming onto the market. The result? A seller’s market in overdrive, with home prices rising accordingly. 

As we ease into the last quarter of 2021, many economists are beginning to predict where the housing market may be headed during the upcoming year. While the pendulum doesn’t seem to be swinging away from the current seller’s market, they are seeing trends that hold some good news for those thinking about buying a home in the near future. 

Slow Your Roll

Home prices jumped up at staggering rates over the past year, with the high point being home prices selling for 18.6% more in June of 2021 when compared to June of 2020. The market was being driven by a rush of motivated buyers looking to take advantage of low home interest rates, with sellers being in short supply. Now, with elevated prices, more homeowners may be lured into selling, eventually increasing home inventory in the coming months. 

Home prices are expected to keep ascending in the coming year, but likely at a more modest rate. While some forecasters predict year-over-year price jumps in the range of 12%, far more are anticipating rates closer to 8% or 9%, and some predictions even slowing the escalating prices to as little as 3.2%. Housing prices beginning to level out goes hand in hand with an increase in the inventory of properties on the market, and both factors bode well for buyers. 

Put Away the Helmet

This past year was rife with stories of frantic bidding wars and properties selling sight-unseen and uninspected, well above their listed price. Buyers this past year were prepared to enter a highly competitive market, with almost everything on the market attracting a slew of interested parties. Currently, in many local markets, buyers are forced to put in their initial offers above the listed price, just to have a shot at closing.

While sellers can still expect to be calling the shots for the time being, it seems the housing market will be toning down the “extreme sport” aspect of trying to buy a home. Buyers can expect less outbidding, and first offers on a property will likely fall back to below the listed price. Even now, in months marked by tales of cutthroat competition, at least two-thirds of the market is selling for at or below listed price, indicating a shift towards a better-balanced market.

Can You Have Your Cake and Eat It Too?

Probably not. If you are looking to buy this year, but waiting for the market to cool down, your delay may come with a financial consequence. In response to a lively real estate sector, nearly everyone is betting that we will see a jump in home interest rates in the coming months. Mortgage rates over the past several years have remained at record lows, providing alluring kindling for the current buyer-saturated situation. 

Now with buyers revved up, reining in interest rates may be yet another step towards leveling out the real estate playing field. When rates rise, we’ll likely see a drop off in buyers, with the higher rates potentially putting homeownership out of reach for some. Current rates that have been kept at a remarkably low 2.9% will probably rise this year- perhaps by as much as a full percentage point. As buyers drop away from the market, normal patterns of buying and selling should return. 

Even with things beginning to balance, it is still a question of whether home buying can remain affordable. Rates of value appreciation coupled with higher interest could mean a market where rising prices are far outpricing gains in labor and earnings. The result is perhaps more situations where the financial considerations of home buying cannot square up with the salaries of first-time buyers.

Fawnridge Realty

Cautiously optimistic seems to be the gist of real estate’s predictions for buyers, but always optimistic is what you’ll discover at Fawnridge Realty. What’s our secret? We work with properties in beautiful Lake Carroll, IL where there is truly something for everyone! Contact us today to learn more.