Housing Prices Are Up Again. When Will They Come Down?
Key Takeaways
- Housing prices increased by 3% in Q2 this year compared to last year
- Most metropolitan areas have seen housing prices increase steadily all year
- The median price of a home in the United States is $421,774 right now
U.S. home prices have been climbing for months. What does that mean for buyers and for the market in general? We’ll discuss.
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How do housing prices look this year?
In July 2023, U.S. home prices were up 1.3% compared to 2022. On average, the number of homes sold was down 14.7% year over year. The national average 30-year fixed rate mortgage rate is at 6.8%, which means it’s up 1.4 points year over year.
According to Redfin, the median price of a home in the U.S. is $421,774. Five years ago, in July of 2018, that median price was just $288,206.
Five of the most appreciated areas in the U.S. were in Maine, Connecticut, New Hampshire, Arkansas, and New Jersey, with annual appreciation rates of 7.6%, 7.6%, 7.1%, and 6.9%, respectively. Camden, New Jersey (near Philadelphia) had the greatest annual price increase at 10.6%. San Francisco-San Mateo-Redwood City, California, had the largest decline of 12.2%.
What does this mean in a broader context?
Housing market conditions will likely remain challenging for buyers in the near-term if the Fed continues its rate hikes and housing demand continues to outpace supply.
“Inventory is approximately 46% below the historical average dating back to 1999,” according to Jack Macdowell, chief investment officer and co-founder at Palisades Group. “We think that it is highly unlikely that the inventory problem will be resolved in 2023.” People who bought their homes with a low mortgage rate at 3% are not going to want to buy a home now at 6% or 7%, so everyone is in a bit of a holding pattern that doesn’t show signs of easing up for the rest of the year.
Mortgage originations hit their lowest point in Q1 of this year since Q2 2014, and existing-home sales are down nearly 19% compared to last year.
The bottom line
Analysts tend to agree that any market correction on the horizon is going to be relatively small. As of now, no one is predicting another Great Recession. For one thing, homeowners’ balance sheets are much stronger today than in 2008. There also just isn’t nearly the same amount of inventory as there was 15 years ago.
We’re expecting high prices to stay right where they are for the rest of this year. In the next five? A modest decrease and slowdown looks more likely.
So, now might not be the time to buy a house, but it is always time to take charge of your finances. Use one of Q.ai’s Foundation Kits, like Global Trends, to choose a theme and invest with one click.
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