Waiting for Home Prices to Drop? Wait Longer?
Are you waiting for the home prices to go down? Are you as confused as a lot of people? Are house prices going up or are they coming down? There’s a lot of confusion out there. The news media, the social media, a lot of information that may not be accurate. So a lot of the buyers in general are confused. I’m going to show you exactly where the prices are headed. So if you’re thinking about buying, or if you’re thinking if this is right time to buy, let’s go for it.
So one thing is for sure, the housing market has been very challenging in the last two or three years. Prices went way up very fast. Interest rate went up very fast. For the first time in history, it almost tripled in one year, which has never happened before. At the same time, the inflation is around 8%. So it’s a tough market to buy in. Yet there is a lot of people buying. In fact, there’s a shortage of homes for now. So how can that be? Why is this possible? The rates have gone up for the first time again in history. Since 2010 and 2011. The run has been 10 to 12 years of prices going up and up and up and has not come down in ten to twelve years. The price seems to have peaked in June of 2022, and it lowered the price in 15 to 16. Of the metro areas, they went down as much as ten to 15%. But as of February and March, they are tending or they’ve actually come up. That’s why this housing market is very confusing. And if you’re thinking about buying, I feel your pain or feel your confusion. But here are the numbers of what’s going to happen with the prices as we go along in the next couple of months, or at least this year. So one of the factors is the shortage of homes. But let’s look at other factors.
According to Selma Hepp, chief economist at CoreLogic, she’s saying that “US home prices rose by 0.8% in February, indicating that prices in most markets have already bottomed out. And a recent survey from Zonda shows that “53% of millennials are still renting right now because they’re waiting for the home prices to come down.” But here’s the thing. The most recent data shows that home prices appear to have bottomed out and are now on the rise again. I’m going to show you a chart which shows us what’s happening in the price in the last six months. But before I do that, I wanted to give you a quick example. Back in fall of 2022, I listed a townhouse in South Orange County. It was listed for $1,100,000. And I told the seller that that was going to be very high, the house or the condo which I had sold him. I had done my research and told him that he was going to sell around a million dollars or a million 50 max in that market. But he insisted that “Hey, prices have gone up, homes are going out the door,” and insisted that I listed for $1,100,000, which I did because of course, I had to do what my seller wanted me to do against my wishes. And I was not sure also what was happening in the market because it’s a changing market. But I knew that the fall season was slow, market had slowed down. Buyers were shocked by the interest rate, buyers were shocked by the home prices. Buyers were shocked by then the $6 a-gallon gas prices, at least in Orange County, California.
I listed the property and we all know what happened in the last two or three years. There was 50 to 70 people coming in the open houses. Well, come October, when I list this price, I put it in the Multiple Listing Service. I advertise on Zillow and Redfin and all the social media and all of my website, sent out flyers, sent out invitations. I had drinks and cookies and candies and everything ready for a big crowd. Guess what happened? It was a nice day, a little bit of a cloudy day, only two parties showed up. Yes, that was disappointing, very disappointing. At the end of the day, come December, because the market was in shock. Buyers were in shock. That townhouse did not sell. Apparently, the seller was not very happy with me, despite my advice to him that that was not the right price. So it did not sell. And then he decided to rent it out. When he went to rent it out, he decided to sell it again and he picked another agent, which is kind of common because he was at this point upset with me, although he did not take my advice. So he listed now the property instead of $1,100,000, listed it for $1,500,000. The property sat vacant for six to seven months. So he lost rent on that, or mortgage insurance, or homeowner’s insurance, whatever. And it did sell close to a million dollars. So yes, it did sell and there was a price drop, but the prices have come up.
Let me give you another scenario. Just yesterday, there was a really hardworking agent in our office. He listed a house, an attached home in Placentia for in the $699,000 range. Just last week, he had an open house and there were 60 to 70 groups of people coming in. Not people, but groups of people coming in. And as of yesterday, he had at least twelve offers. And many offers are $25,000 to $40,000 over asking price. So yes, the market has changed in the six months from fall of 2022 to right now in April 2022, there’s a big shortage. There’s multiple bids on offers. Homes are selling over list price. And there’s anywhere from 20, 30, 50 up to 200 groups of people going to see an open house if they’re held on both Saturday and Sunday. So we’re back on that up-and-up market. Again, you can see this graph. It shows or comparison between homes from November of 2022 through February of 2023. As you can see, home prices are up in majority of the country. And this is by Black Knight. This chart was produced by Black Knight. As you can see, November 2022, home prices declined in 96% of all the areas. And if you see the chart as of February 2023, it shows a 78% increase in all of the countries. So going from a decline in 96%, there is an increase of 78% nationwide. So the prices are going up.
And as you may know, or may not know, one of the biggest factors is, there’s a shortage of inventory nationwide. Of course, hyper-locally or locally, it may be different, but overall they are seeing a price increase. So the big question is, should you keep waiting? If you have waited for a year, two years, three years, like a lot of the buyers I know, they are regretting it. So should you buy now or should you wait? And my answer in general, if somebody asks me, “Hey Mike, is this a good time to buy?” And I say anytime is a good time to buy, as long as you as a buyer are ready, willing, and able to buy. The other thing I can say is if you are waiting to buy because you think the prices will come down, or if you think the rates will come down, then you are chasing the market and nobody wins. Chasing the market, nobody can predict what’s going to happen. So the best thing to do is talk to your local expert, your local Realtor. I’m in Orange County, California. Feel free to call or email me if I cannot help you in your neighborhood or in your town. I belong to a network of nationwide top agents, top realtors, and I can refer you to the one who can help you, explain to you what’s happening, and let you know when’s the best time to buy, if not now, in your area, maybe after three months or six months. So feel free to direct message me. I’ll be glad to help.