When will HOME PRICES go down | Home PRICES RISE
Home prices continue to rise at an exorbitant pace as we rapidly approach the winter months which is traditionally the slowest time of year.
But with the way properties are getting bought and the continued risk buyers are willing to take you wouldn’t be able to tell the difference. Here’s a few examples of what I am seeing in the market and also what the latest research is showing on when home prices will go down.
Home prices continue to rise and have made homes affordable for several segments of the population. Millennials are rapidly approaching the age when they would buy homes. This is creating demand for homes in a tight housing market resulting in housing prices rising.
In this situation, the 3 bed 1 bath house was listed for $359,900. The house went on contract after 1 open house and 3 days post listing. It sold for $400,000 with no contingencies and closed in 45 days.
The next situation was even more interesting. What makes this one interesting was the house was a teardown.
It was listed at $379,000. In this instance, the property sold for $400,000. However, what made this interesting is the buyers listed the property two months after close. However, what they did was they did the paperwork to split the lot into 2.
They also got all the permits for a teardown and then listed the lot with the tear-down house for $300,000. Note they didn’t tear down the house.
In this instance, the seller owned two adjoining lots, one of which was lakefront. One lot, the one further from the lake had a teardown, and the other lot on the lakefront was ok. It was 2 bed 1 bath with an unconventional floor plan. Most would probably tear down this home as well.
The property that wasn’t on the lake with a teardown was originally listed at around $275,000. The lakefront lot was listed at $350,000. So total $625,000.
Both properties were on an acre lot combined.
As I mentioned earlier, vacant lots are typically sold for around $200,000. So the 2 combined would be $400,000. Not a bad way to list the properties for a $225,000 gain. Oh, by the way, they both obviously went $30,000 over ask.
I call this the mold house. Visible mold on the ball and this house sold for $30,000 over ask and what’s ridiculous was the buyers waived all contingencies. That includes a home inspection. The house was built in 1929.
I hope the buyers were in the construction industry, else it’s absolute madness to take this level of risk. The mold wasn’t localized either. There were multiple areas of visible mold.
So what’s the takeaway from this. Well honestly sellers are taking full advantage of the supply shortage, and buyers certainly seem beyond desperate. It’s borderline incomprehensible.
And here’s the problem. By the end of 2022, Goldman Sachs is forecasting another 16% growth in home prices.
This 16% is lower than the 17.7% growth over the last 12 years, but it’s still amazing. Not only that, Goldman predicts another 6.2% growth in 2023.
So how does Goldman rationalize this mess? After all we know mortgage rates are rising and will continue to do so which is a significant headwind for home sales. One would think this would result in home prices going down.
30-year mortgage rates are now well into the 3% range and are cruising into 4% land in the not too distant future.
Additionally, we know homebuilder optimism is up. Prices of raw materials like lumber are coming down even though copper prices are soaring. This should increase supply and result in reducing home prices.
Goldman accounts this home price optimism to demographic shifts. Per Goldman, “ Demographic tailwinds are likely enough to prevent the supply of homes from normalizing quickly in the near term. We estimate that demographic changes—most importantly, millennials moving into the age range where household formation and homebuying tend to peak—have boosted the trend rate of household formation to roughly 1.3 million per year.”
Now I know I have primarily cited Goldman's research in this video. But other estimates for home prices are also high.
Now I am fortunate as I am not willing to throw caution to the wind and win a place at all costs. Things such as some level of home inspection aren’t just customary but much needed in most instances.
Anyway, I will be sure to keep you updated on what I am seeing and our own process. So if you liked the content, thanks for watching, and remember to like, subscribe and ring the notification bell, and I will see you in the next one.
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DISCLAIMER: The opinions expressed in these videos are not meant to be financial advice. Always consult with your financial advisor and do your own due diligence as individual facts and circumstances may vary.
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