Home prices have continued to surge despite higher mortgage rates and an increase in housing supply—factors that typically put downward pressure on home prices. But the numbers still show the market is quite resilient and costly.
The median home sales price has jumped every month this year, reaching a record high of $413,800 in June before falling slightly in July to $403,800, according to the National Association of Realtors (NAR). Some housing experts say that a slight drop is seasonal as the housing market tends to slow down in the fall. Still, the existing-home sales price in July was nearly 11% higher than a year ago. Such higher housing costs have taken a toll on home shoppers as mortgage applications are at their lowest level in 22 years, according to the Mortgage Bankers Association (MBA).
The current change in the housing market is partly due to the economy at large and consumer sentiment. And right now, the economy is on shifting sands—on one hand, there are signs of a weakening economy as the gross domestic product (GDP) has declined for two consecutive quarters, which some economists say indicates a recession. But on the other hand, the job market and consumer spending is still strong.
The MBA hasn’t included a recession in their baseline forecast, but they estimate a roughly 50% chance of the U.S. entering a mild recession over the next 12 months. Housing Market Predictions for September 2022
Many housing insiders warn buyers against trying to time the market as the economy wades through this period of uncertainty.
“Deciding to buy now or wait is going to depend on the individual buyer’s motivation and situation. Waiting may not be a viable option,” says Krista Forsberg, a real estate agent at Keller Williams Realty in Edina, Minnesota. “Even if a buyer can push pause on buying to later in the year or 2023, there isn’t likely to be a significant improvement in prices or interest rates.”
Housing experts say they are keeping a watchful eye on the economy, which is being pulled in all directions by inflation, skyrocketing gas prices, the war in Ukraine and Covid-19, to name a few. While housing has been the star of the U.S. economy the last few years, there are signs of wear—namely, rising interest rates making it harder for buyers to access affordable housing.
The amount of existing-home sales dropped 5.9% from June to July, marking the sixth consecutive month of declining sales, according to the National Association of Realtors (NAR). The median sales price declined slightly to $403,800—but that’s still nearly 11% higher than a year ago.
Will Home Prices Continue to Rise?
Inflation, high mortgage rates and record-high home prices are chipping away at housing affordability. A typical monthly mortgage payment is 76% higher today than it was in June 2019, according to a report by Zillow. And earnings aren’t keeping up with the inflated costs. While wages grew 5.2% in July compared to the same time last year, they still fell behind the 8.5% increase in inflation.
MBA economists also don’t see home prices falling in the near future. They forecast a 9.9% yearly increase in prices in 2022 compared to 2021 and a 3.1% gain in 2023.
Housing Inventory Predictions for 2022
Home prices might expand, but the options will, too, according to some economists.
In July, the inventory of homes to buy surged at the fastest rate since 2017, up nearly 31% compared to a year ago, according to a Realtor.com report.
“The housing market is continuing to move toward more balance,” the report said. “Inventory levels continue to rise, providing more options to homebuyers who are still actively looking for a new home, and price reductions are also increasing, as sellers adjust to the new normal.”
Should I Buy a Home Now or Wait?
Buying a house—in any market—is a highly personal decision. Because homes represent the largest single purchase most people will make in their lifetime, it’s crucial to be in a solid financial position before diving in.
Use a mortgage calculator to find out how much your monthly housing costs will be based on your down payment and interest rate.
