In spite of predictions, home prices are still climbing. Should you buy now?

Photo (c) Klaus Vedfelt - Getty Images

For many, a 7% mortgage rate is starting to feel normal

For the last half of 2022 and the first half of 2023, YouTube pundits professing knowledge of the housing market predicted a crash in home prices. It didn’t happen.

In fact, for the last few months, home prices have actually started going up again, defying mortgage rates that are twice what they were just two years ago. In June, the average new mortgage payment hit a record-high of $2,656.

S&P CoreLogic Case-Shiller’s home price index is a lagging indicator of home prices but its latest report shows U.S. home prices rose for a fourth consecutive month in May. But it noted that regional price differences are getting wider. Some markets may be losing ground but others are making gains.

On a national, seasonally-adjusted basis, home prices rose 0.7% from April’s home prices. Compared to May 2022, however, prices were 0.5% lower.

‘Broad-based rally’

"The ongoing recovery in home prices is broadly based,” said Craig J. Lazzara, managing director at S&P Dow Jones Indices. “Before seasonal adjustment, prices rose in all 20 cities in May as they had also done in March and April. Seasonally adjusted data showed rising prices in 19 cities in May, repeating April's performance.

The outlier is the Phoenix housing market, which saw huge price gains from 2020 to 2022. All of this is happening as mortgage rates continue to flirt with 7%, compared to just under 3% in late 2021.

So the question should be asked – is now a good time to buy a home? If you ask a real estate agent, you can bet the answer will be “yes.” But what about asking someone a bit more objective?

Reasons to buy now

In an interview with investment website The last month, personal finance guru Dave Ramsey said he thought now is a good time to buy, under certain circumstances. Ramsey said buyers need to have little debt and have an emergency fund available.

Because of high interest rates, Ramsey said there is less competition to get the home you want. He also notes there continues to be a housing shortage.

In a recent interview with ConsumerAffairs, Christopher Stout, principal at StoutCap, a real estate investment firm, said that lack of inventory has made it hard for buyers.

“The market has been generally frozen now, for almost a year,” he told us. “From what we see, values have changed so rapidly that there is an emotional reaction to not want to believe what the ‘new normal’ is. More inventory will hit the market and buyers will determine value. From there, values will climb over time.”

Another bullish indicator are the national home builders. As they reported second-quarter earnings their stocks soared because profits were up and so were margins.

In spite of predictions they would be unable to sell expensive homes in a high interest rate environment, they seem to be selling everything they build.

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