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After months of frenzied demand, with homebuyers scrambling to outbid each other and prices climbing to historically high rates, the housing market is showing signs of slowing.
"We're witnessing a housing recession in terms of declining home sales and home building," said National Association of Realtors chief economist Lawrence Yun in an August report.
If you’ve been thinking about buying a home, a cooling market might seem a sign to buy. Yet, as prices start to drop, interest rates are on the rise. You might be debating whether or not now is a good time to purchase a home.
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There are some other factors to consider first, however. You’ll need to look at housing prices and interest rates and whether you can realistically afford to purchase a home right now.
Here’s the breakdown of the current and forecasted market conditions, and what real estate experts are saying.
Buying a home in 2022
Housing prices have come down from their peak in June, when some buyers were making concessions and all-cash offers just to compete in a highly competitive market.
But the average 30-year fixed rate rose to 5.66% in the first week of September according to housing giant Freddie Mac. That’s still almost double than what the home loan rate was a year ago.
And the Fed raising interest rates means it’s also become more costly to borrow. The Fed’s recent Beige Book report notes that residential loan demand has been “weak” amid increased mortgage interest rates.
New home construction has decreased, due to the high cost of building supplies and consumers being priced out of the market. About 16% of home-purchase agreements were called off in July — marking the highest rate of cancellations in over two years.
“With home prices expected to moderate over the forecast horizon and economic uncertainty heightened, both homebuyers and home-sellers may be incentivized to remain on the sidelines,” said Doug Duncan, Fannie Mae senior vice president and chief economist, in a report released in September.
Duncan explains that homebuyers may be expecting home prices to decline. Meanwhile prospective home-sellers may be unwilling to relinquish their lower, fixed mortgage rates, which could result in home sales continuing to cool.
Reasons to buy a home now
Deciding whether or not to buy a home right now can depend on both your financial situation and whether it’s the right time.