Whether you’re a potential homebuyer, seller, or both, you probably want to know: will home prices fall this year? Let’s break down what’s happening with home prices, where experts say they’re headed, and why this matters for your homeownership goals.
Last Year’s Rapid Home Price Growth Wasn’t the Norm.
In 2021, home prices appreciated quickly. One reason is that record-low mortgage rates motivated more buyers to enter the market. As a result, more people were looking to purchase homes available for sale in Chicago, Illinois. That led to competitive bidding wars, which drove prices up.
CoreLogic helps explain how unusual last year’s appreciation was:
“Price appreciation averaged 15% for the full year of 2021, up from the 2020 full year average of 6%.”
In other words, the pace of appreciation in 2021 far surpassed the 6% the market saw in 2020. And even that appreciation was greater than the pre-pandemic norm, typically around 3.8%.
This shows that 2021 was an anomaly in the housing market spurred by more buyers than homes for sale in the Chicagoland area and surrounding suburbs.
Home Price Appreciation Moderates Today.
This year, home price appreciation is slowing (or decelerating) from the feverish pace the market saw over the past two years. According to the latest forecasts, experts say on average, nationwide, prices will still appreciate by roughly 10% in 2022 (see graph below):
Why do all of these experts agree prices will continue to rise? It’s simple. Even though the housing supply is growing today, it’s still low overall thanks to several factors, including a long period of under-building homes. And experts say that will help keep upward pressure on home prices this year.
Additionally, buyer demand has slowed since mortgage rates are higher this year than last year.
As the market undergoes this change, its true price appreciation this year won’t match the feverish pace in 2021. But the rapid appreciation the market saw last year wasn’t sustainable anyway.
What Does That Mean for You?
Today, the market is beginning to move back toward pre-pandemic levels. But even the 10% home price growth forecast in 2022 is well beyond the 3.8% that’s more typical for a normal market.
So, despite what you may have heard, experts say home prices won’t fall in most markets. They’ll appreciate more moderately.
If you’re worried the house you’re trying to sell or the home you want to buy will decrease in value, you should know experts aren’t calling for depreciation in most markets, just deceleration. That means your home should still grow in value, just not as fast as it did last year.
Bottom Line.
If you’re considering moving, you shouldn’t wait for prices to fall. Experts say nationally, prices will continue to appreciate this year, just at a more moderate pace.
When you’re ready to begin the process of buying or selling, let’s connect with real estate experts in Chicago at KM Realty Group LLC, so you have a local market expert on your side each step of the way.
