After the excesses of 2021 and 2022, rising interest rates have taken their toll on home sales. Yet, they haven’t done much to slow house price increases.
According to Realtor.com, median house prices across the U.S. rose by 0.9% again in May 2023.
These ongoing price increases are putting paid to many Americans’ plans to buy a house any time soon and have sparked a hot debate amongst real estate experts about when the increases will end.
Keep reading to find out more about their predictions for housing prices.
What’s Ahead for Housing Prices?
Supply and demand dictate the median price of real estate. So, as long as there’s demand for housing, prices will go up.
Despite this, the NAR’s chief economist predicts a moderate downturn in prices in 2023. On the contrary, Fannie Mae predicts a further 4.2% increase in prices for this year.
One thing economists agree on is that we’ll never see a situation similar to the Great Recession any time soon.
Is this a Housing Bubble?
The term housing bubble refers to a period of soaring home prices followed by a resounding crash in the real estate market. It’s safe to say that’s not what’s going on here.
Although home prices aren’t increasing at the rate they were during 2020 and 2021, they’re increasing at a normal rate. It only seems like there’s been a rapid decline in percentage price increases when compared with the double-digit escalations of the previous years.
Are We Headed for a Housing Recession?
Shrinking sales are usually a sign that the housing market is in recession, but this only applies if they keep declining for six months or more. Last year saw an ongoing decline in home sales, but a 14.5% increase in sales during February 2023 put a stop to that.
Fannie Mae predicts sales declining overall by over 18% during 2023, but there are still no fears of a housing recession amid ever-increasing prices.
Declining home sales are only ever cause for concern when supply far outstrips demand, causing a rapid drop in home prices and harm to the economy.
What we’re seeing nowadays isn’t so much an unusual situation or cause for alarm; it’s simply an adjustment to the extremely high home prices and home sales figures of 2021.
For 2024, Fannie Mae predicts that sales will rebound by around 7.1%.
Is There a Solution for Would-Be Homeowners?
One reaction to the never-ending escalation of home prices is the tiny house movement.
Many people see this tiny house lifestyle as an excellent way to cut down on their living expenses and material possessions while enjoying a more meaningful existence.
However, it can prove difficult to find land to build your tiny home on, and like everything trendy, these diminutive homes are also undergoing massive price increases.
In a related trend, some Americans have taken to living in their RVs full-time, but the costs associated with this lifestyle can soon outweigh the novelty.
What’s the Verdict?
If you’re not willing to sell all your worldly possessions and move into an RV or tiny home, it’s best to sit tight, save up, and wait for housing prices to come down.
Nobody can say for sure what will transpire in the future of real estate, simply because they have nothing to compare our current situation against.
It’s been a topsy-turvy few years across the globe. Browse our blog for more insights on how to adapt to changing times.