Spring is often a popular time for many to hunt for a home and lock in a rate. While mortgage rates are expected to drop this year, what do you predict will happen to home prices?
As we all know, there are a variety of factors that affect the price of a home. Lower mortgage rates can stimulate demand for housing as borrowing becomes more affordable, but that increased demand can, and often does, drive up home prices. Then, when we evaluate the economy overall, factors like employment rates, wage growth or lack thereof, and consumer confidence play a significant role in how we see the housing market ebb and flow. And limited housing supply, especially in desirable locations, can lead to bidding wars and higher prices. The stronger our economy is the higher demand for housing is, which often pushes prices up. If mortgage rates continue to drop, I anticipate that—on the whole— home prices will rise. However, with it being a presidential election year there is the potential for sudden economic shifts which could cause mortgage rates, and subsequently home prices, to turn on a dime in either direction.
Do you think home prices will fall this year by spring? Why or why not?
Historically, spring is definitely a popular time for homebuyers—especially in my neck of the woods along Florida’s Emerald Coast. However, whether home prices will fall by spring depends on whether the economy continues as it is with mortgages and unemployment rates trending downward. If there is a significant increase in inventory (i.e., more homes for sale) coupled with reduced demand, it could put downward pressure on prices. On the other hand, if demand remains strong and outpaces the current supply, prices may rise despite lower mortgage rates. Along my coastline, prices have remained steady and, although transactions are down, price points are still continuing to rise at this time.
Also, what do you think will happen to home prices through the end of the year?
Well, if mortgage rates continue their downward trend, I expect that overall, home prices will experience an upward trajectory. However, given that we are in a presidential election year, and there’s the potential for policy change and the impact of the election on the markets, there exists the possibility of abrupt economic fluctuations. These shifts could swiftly influence mortgage rates, consequently affecting home prices.