The U.S. home market has had some ups and downs recently, leaving many people curious about what’s happening. Home prices have begun to slow down after rising steadily for some time, according to recent statistics. Here’s what you need to know about what’s happening and how it might affect you.
The Case-Shiller Index Findings
According to the Case-Shiller Index, which monitors real estate values, the cost of homes was increasing until November 2023, at which point there was a small decline in prices.
Initial Decline in Home Prices
Prices continued to decline by 0.4 percent in December, following this trend, and the price of homes actually decreased in 17 of the 20 largest cities.
A Reason for Reassurance
But don’t hit the panic button just yet! While prices might be cooling off a bit, they’re still higher than they were last year.
Price Increase Compared to Last Year
In fact, compared to December of 2023, home prices are up by 5.5 percent. That’s a pretty big jump, and in some places – like San Diego, Los Angeles, and Detroit – prices have actually gone up by over 8 percent.
City Averages
When we look at the average house prices in big cities, they’re up by 7.0 percent and 6.1 percent. So it’s not all doom and gloom.
Experts Downplay Decline
So why did all this happen? Well, the experts are downplaying it. According to economists, 2023 was a good year for home prices – and the data seems to be on their side.
Record Highs
They say that towards the end of 2023 the housing market simply faced “significant headwinds” (aka challenges).
They say that even with the price drop in December, the Case-Shiller Index still hit record highs for seven months in a row last year.
House Prices Better Than 35-Year Average
They also point to statistics that indicate 2023 house prices were better than the average over the past 35 years.
Regional Disparities
Different parts of the country had different experiences. San Diego saw the biggest boom, with home prices going up by 8.8 percent.
Los Angeles and Detroit weren’t far behind, both seeing an increase of 8.3 percent. The Midwest and the Northeast were also in luck – those regions saw a 6.7 percent house price increase.
Interest Rates Impact
Let’s briefly talk about something that affects all of us: interest rates. The Federal Reserve has been raising rates to deal with inflation.
While they don’t set your mortgage rate directly, their moves affect it. Basically, because of these rate changes, getting a mortgage has become more expensive.
Higher Rates, Tougher Purchases
According to experts, higher rates have made it tougher for people to buy homes, which, in turn, has slowed down home sales.
Higher rates mean higher monthly payments, which can make it tough for some people to afford a home.
Effect on Housing Market
Plus, when it’s more expensive to borrow money, it can cause fewer people to want to buy, which can slow down the housing market.
Higher Rates Worsen Shortage
Experts say this is making the housing shortage worse. According to experts, people are holding onto their homes instead of selling because it’s just not worth it with the current rates.
A Silver Lining
Luckily, there’s a silver lining – interest rates are starting to go back down. As of February 21, 2024, the average 30-year mortgage rate was 7.13 percent. It’s still high compared to a few years ago, but at least it’s not going up.
Considerations for Sellers
So, what does all this mean for you if you’re thinking about buying or selling a home?
Well, if you’re thinking about selling, you might have to be a little flexible on the price you’re asking for.
With higher interest rates, some people might not be able to afford as much house as they could before.
Buying Challenges
And if you’re on the hunt for a new home, brace yourself for a bit of a shock when you see the price tag.
Downsizing or Exploring Different Neighborhoods
You might need to consider downsizing or looking in a different neighborhood to find something you can afford.
Monitor Interest Rates
You’ll want to keep an eye on interest rates, and if they keep going down, it might be a good time to buy before prices start going up again.
Considerations as Rates Fluctuate
But if they start going back up, you might want to hold off and wait for them to come back down again.
Navigating Changes With Smart Decisions
In a nutshell, the housing market is going through some changes. It might seem a bit tough right now, but if you keep an eye on mortgage rates and stay smart about your decisions, you can still navigate the housing market and find the perfect home at the right price.
Opportunities Abound
There are still opportunities out there for both buyers and sellers.
The post Home Buying and Selling in a Cooling Market first appeared on Career Step Up.
Featured Image Credit: Shutterstock / Andy Dean Photography.
The content of this article is for informational purposes only and does not constitute or replace professional financial advice.
