Waiting for home prices to fall so you can buy? You may have a long wait

Photo (c) Fever Pitched - Getty Images

The only cities where values are falling have the nation’s most expensive homes

In spite of a doubling of mortgage rates over the last 12 months, pricing millions of people out of the housing market, home prices have yet to crater. In fact, an industry report shows they’re still going up.

In its report on the fourth quarter of 2022, the National Association of Realtors (NAR) found average U.S. home values went up 4% compared to the fourth quarter of 2021 when mortgage rates were around 3%.

While that’s a smaller annual increase than the 8.6% rise in the third quarter, the median home value of $378,700 continues to put homeownership out of reach for many people. Home values have yet to fall except in a handful of housing markets.

Unfortunately, unless you are very affluent, that might not help much. According to the NAR report, San Francisco suffered the largest decline in median home values in the last quarter, with values falling 6.1%. However, even with the decline the median home value in that market is $1.23 million.

San Jose and Anaheim, Calif., have also seen home prices decline but the median home sale price is still north of $1 million.

Where prices are rising

Elsewhere, prices are still rising – especially in Florida. NAR reports the median home price in Sarasota is up 19.5% year-over-year. Prices are up 17.2% in Naples, 15.2% in Punta Gorda, and 14.5% in Daytona Beach.

But if fewer people are buying houses, how can prices keep going up? It’s a matter of supply and demand, according to NAR chief economist Lawrence Yun.

“Even with a projected reduction in home sales this year, prices are expected to remain stable in the vast majority of the markets due to extremely limited supply,” Yun said. “Moreover, there are signs that buyers are returning as mortgage rates decline, even with inventory levels near historic lows.”

Why most prices aren't falling

In short, new home construction has lagged behind demand for years. Now, with mortgage rates over 6%, current homeowners with low mortgage rates are less likely to plant a “for sale” sign in their front yard.

If there is any good news for would-be buyers it is this: even with double-digit price increases some attractive housing markets are still affordable. According to Redfin, January’s median home value in Myrtle Beach, S.C., was $270,500, well below the national median home price.

Meanwhile, buyers willing to wait a few months may be rewarded. As we recently reported,  Aaron Wagner, CEO of Development at Axia Partners and founder and managing partner at Wags Capital, believes home prices will begin to reset in the second quarter of this year, with some dramatic price reductions before the end of 2023.

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