Thursday, April 13, 2023 / by Barbara Oleska
There have been many shifts in the housing market lately. Mortgage rates rose dramatically in 2022, which impacted many people’s ability to buy a home. And after several years of rapid price appreciation, home prices finally peaked last summer. These changes spurred a rise in headlines claiming prices would end up crashing.
Even though we are no longer seeing the buyer frenzy that drove up home values during the pandemic, prices have been relatively flat at the national level. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), doesn’t expect that to change:
“[H]ome prices will be steady in most parts of the country with a minor change in the national median home price.”
You might think sellers would have to lower prices to attract buyers in today’s market, and that’s part of why some may have been waiting for prices to come crashing down. But there’s another major factor at play – low inventory. As Yun says, that’s limiting just how low prices will go:
“We simply don’t have enough inventory. Will some markets see a price decline? Yes. [But] with the supply not being there, the repeat of a 30 percent price decline is highly, highly unlikely.”
As you can see in the graph, we’ve been at or near record-low inventory levels for a few years.
That lack of available homes on the market is putting upward pressure on prices. As Bankrate puts it:
“This ongoing lack of inventory explains why many buyers still have little choice but to bid up prices. And it also indicates that the supply-and-demand equation simply won’t allow a price crash in the near future.”
If more homes don’t come to market, a lack of supply will keep prices from crashing, and, according to industry expert Rick Sharga, it isn't likely inventory will rise significantly this year:
“I believe that we’re likely to see low inventory continue to vex the housing market throughout 2023.”
Sellers are under no pressure to move since they hold plenty of equity right now. That equity is a cushion for many homeowners, lowering the chances of distressed sales like foreclosures and short sales. Also, many homeowners are locked into very low mortgage rates.
With so few homes available for sale today, it’s important to work with a trusted real estate agent who understands your local area and can navigate this current market volatility.
Many expected prices would crash this year because of low buyer demand, but that is not what's happening. Why? There aren’t enough homes on the market. If you’re thinking about moving this spring, let’s connect.