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Should You Wait for Housing Prices to Go Down?

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As of this writing, Redfin’s Vermont Housing Market Overview supports what today’s homebuyers are experiencing as they search the real estate offerings: Times are tough. If you’re in the market for a new home, you might be asking yourself whether this is a smart time to buy a home.

Real estate prices have risen quickly over the past few years. In fact, the median sale price of Vermont homes was calculated at around $392,000 in June of 2022, an increase of over 19% compared to last year. Adding insult to injury, the number of homes for sale is down by over 33%, and homes are spending 20 fewer days on the market. So, even if you have the money to buy a higher-priced home, you may not be able to find one that checks the boxes on your wish list or meets your needs. You could spend a lot of money on a fixer-upper that will cost more over time in updates and retrofits.

All of these factors lead to a challenging homebuying atmosphere that is forcing many prospective buyers out of the market. This could be seen as a good thing: the more people who opt out, the more housing stock can recover, which will reduce demand and, ultimately, reduce prices. It’s about supply and demand after all. But for those who need to buy now, it can be frustrating and stressful.

If you are looking for a home, you may wonder if you should wait for prices to go down. Maybe in a year or two, the bubble will burst, and it will be easier to find the house of your dreams within a reasonable budget. Unfortunately, this is not like the housing crisis of 2008. It’s not the result of speculation driving up costs. It is a perfect storm of factors that will likely take a long time to recover from.

 

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HOUSING PRICES ARE HIGH FOR MANY REASONS

Our current real estate crunch began before the pandemic hit when we were still digging out of the housing crisis of 2008. During the Great Recession, a lot of builders went out of business, and as a result, fewer homes were built, which put a significant dent in real estate inventory.

If low inventory was the fire, there are multiple sources of competition that have fueled higher housing prices:
• Millennials—nearly 22% of the population—flooded the market as they reached homebuying age.
• The cost of building materials rose due to supply-chain issues and reduced the appetite for new construction, pushing more people into the real estate markets.
• Low interest rates made financing a home more appealing.

None of these factors is likely to ease up any time soon. Millennials aren’t going anywhere and will be followed by younger generations soon enough. It takes time to build up housing stock, and the construction industry continues to face supply-chain issues as well as workforce shortages. Of course, mortgage rates are on the rise, which will discourage some from buying. For those who need to buy, though, it will increase the overall cost of buying a home, so it’s not exactly a plus.

 

SO, WHAT’S THE BOTTOM LINE?

There is no way to know what will happen in the housing market, but the likelihood is that prices will continue to rise, though hopefully more slowly than they have over the past few years. As the Federal Reserve fights inflation by raising the Prime Rate, mortgage rates will also rise, which could make it costly for those who choose to wait.

This may sound like grim news, but there is a silver lining for those who are purchasing a home they intend to keep for the long term. Real estate tends to appreciate over time. There are no promises in any investment, but if you hold onto the home long enough, build up equity, and sell when the real estate market is smiling on sellers, you will likely receive a healthy return on your investment.

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