‘More sellers are cutting their list price.’ Here’s exactly what economists and analysts think will happen to home prices in the next few months
Mortgage rates still remain near record lows — some 15-year rates are near 2% and some 30-year rates are below 3%, as you can see here — but many potential buyers, worried about the recent rise of home prices, aren’t sure if they should dip their toes into the housing market. So we asked economists and financial pros what they expected to happen to the housing market through the end of this year.
“Monthly home value growth has slowed from its record-breaking pace this summer, inventory is up for the fourth month in a row and more sellers are cutting their list price. This all points to less competition for home shoppers, but make no mistake, the housing market remains clearly tilted in favor of sellers,” says Zillow senior economist Jeff Tucker. Indeed, the latest Zillow market report released in October notes a slight softening in for-sale markets, with monthly home value appreciation slowing for the first time since January. The Zillow report also reveals that inventory of for-sale listings rose for the fourth month in a row, along with more sale listings cutting prices, which is beneficial for home shoppers. Looking ahead, Zillow economists expect the typical home in the US to increase in value 4.7% over the next few months, resulting in an increase of 11.7% by August 2022.
“The frenetic pace in housing may be cooling somewhat, but demand still far exceeds a limited supply of homes available for sale,” adds Greg McBride, chief financial analyst at Bankrate concurs. “Waiting in expectation that prices will fall seems unlikely to pay off,” says McBride. But he says, proceed with caution: “Waiting until you’re not pressured to make an offer on the spot or sight unseen, forego inspections or waive contingencies is a prudent choice,” says McBride.
Jacob Channel, the LendingTree senior economics analyst, says recent data shows a 2% decline in existing home-sales in August, suggesting the cool off that happens as the weather gets colder has already begun. “Of course, that doesn’t mean home prices are going to plummet, and I expect that even if they do fall somewhat, prices will likely remain relatively expensive into next year,” says Channel.
And for her part, Elizabeth Renter, data analyst at NerdWallet, predicts that in many local markets it will be easier to buy this fall than it has been in the past several months. “As of late, home price growth has begun to slow its break-neck speed,” she says, adding that “this doesn’t mean fall buyers will have an easy go of it, merely that they won’t face obstacles quite as high. More risk- and stress-averse buyers will likely continue putting off their purchase into 2022 or beyond,” says Renter. But Zillow economists foresee a total of 5.93 million sales before the year is over, a 5.1% increase over the historically strong market of 2020.
Because there are so many personal factors that go into deciding when to buy a home that matter more than market conditions, Tucker says, “Those who are ready to buy and have some flexibility should consider doing so soon, if the right house is available, to lock in the best price. Home prices are still rising quickly and mortgage rates are remarkably low. If rates start to rise, which could happen as the Fed slows its pace of mortgage purchases, that would raise the monthly cost of a mortgage.”