Evaluating the Odds of A Decline in Housing Prices

Factors That Influence The Price of Housing Nationwide

Photo by Tierra Mallorca on Unsplash

An Update on the Current Housing Market

The economy has seen a significant level of turmoil following the COVID-19 pandemic. Specifically in the housing market, there was a significant surge in homebuyers and increasing home prices during the pandemic, with increasing interest rates now pricing some of these home buyers out of the market completely. Because of this change in the housing market, many are wondering, does this mean that there could be a decline in house prices with a decreasing buyer pool? Before we get into the odds of a decrease in home prices throughout our housing market, let's take a look at what factors actually influence the price of houses.

Determining What Factors Influence Housing Prices

The biggest factors when considering the price of homes on the market are the actual qualities of the home. Is it in a great location? Does it have multiple bedrooms and baths? Does it need some work and renovations or is it ready to move in? All of these factors play the largest role in setting the initial value of a home. Afterward, the biggest determinant of the value of homes on the market depends entirely on the housing market itself. The current supply and demand of homes on the market is critical to understand when looking to either buy or sell a home. The amount of homes on the market is influenced by a number of factors, the most important being the current average mortgage rates, which are largely affected by interest rate increases from the Federal Reserve, and any changes in the 10-Year Treasury Yield. This yield has a direct correlation with mortgage rates and is described by Forbes as, "the current rate Treasury notes would pay investors if they bought them today". So what are the actual odds of a decline in housing prices?

Evaluating the Chances of A Decline in Housing Prices

With inflation rates at a decades-high level, the Federal Reserve has raised interest rates in the past month in order to curb borrowing and hopefully reduce the inflation rate across the country. This effect is normally felt very closely in the housing market. As mentioned above, the current mortgage rates are simply pricing out homebuyers, which would hopefully balance the market out by encouraging an even amount of buyers and sellers. Even so, this change is not expected to impact the pricing of houses drastically, with Fannie Mae still forecasting a 10.8 percent increase in home prices by the end of the year. While this would be a deceleration in the current rate of increasing values, it still represents a significant jump in the value of houses nationwide.

What Markets Across the United States Are Most Likely to Experience a Price Decline?

With the understanding that home prices across the nation are unlikely to decline, are there any markets that could experience declining prices? According to Fortune, there are a few markets across the nation that could experience a decline in prices as calculated by CoreLogic, a real estate research firm. Across the nation, only 1% of the regional housing markets across the nation have a high chance of a price decline over the coming year. The Kansas City market ranks as one of the 86% of total markets that are not expected to experience a price decrease in the local housing market. The biggest determinant in these statistics is the demand for housing in the market, versus the amount of inventory on the market currently. 

Hire an Agent That Can Navigate The Current Market

If you are looking to buy or sell a home in the near future, it's imperative that you have an experienced agent on your side. As a buyer, having an agent assist you with finding and selecting a property as well as making an offer on that property is critical to your financial success. Even though we're currently in a seller's market, having a listing agent assist you with your home sale is vital to ensuring that you get the most money possible when selling your home. Contact a member of our team today by visiting our website, or filling out the contact form below.