Home values across the U.S. have been going nowhere but up. CNBC reports that the median price of an existing home sold in March was $329,100, which represents a whopping 17.2% increase from just a year prior.
It’s not surprising, then, to learn that 71% of U.S. adults think home prices will continue to rise over the next year, according to a recent Gallup poll. By contrast, back in April of 2020, only 40% of Americans predicted a rise in home values. Though to be fair, at that time, there was a lot of general uncertainty related to the pandemic. It was also before mortgage rates plunged dramatically — a factor that’s helped fuel buyer demand and lead to a rise in home values.
But while it’s easy to see why so many people think home prices will continue to climb, there’s reason to believe they might hold steady or start to come down in the course of the next year.
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Why home prices may not keep climbing
A big reason home prices may not keep rising steadily? They’re already extremely inflated, and buyers may soon reach their breaking point.
Furthermore, another reason why home prices have risen so much is that home inventory has been extremely limited. But as things improve with regard to both the economy and the pandemic, more sellers may become willing to list their properties. Once that happens, and competition opens up, home prices could start to come down
Should buyers gear up for higher prices?
While home prices may not continue to rise month over month for the next year, they may still climb a bit before tapering off or creeping back down toward pre-pandemic levels. And that decline could be gradual. As such, anyone who thinks now is a good time to buy a home should prepare to pay a premium — and take out a larger mortgage in the process.
Of course, qualifying for a larger loan amount isn’t something that happens automatically. To get a mortgage in the first place, buyers must present with strong credit and low levels of existing debt. But while those factors are important, income will likely come into play for those requesting a larger loan amount than they’d normally need. And some buyers may be denied a home loan, not because their credit is poor or they have too much debt, but because they just don’t earn enough.
As such, some buyers today may need to hit pause on the home search front and wait for property values to start to come down. That may not happen until later in the year or even 2022, but it should happen eventually. At the same time, there’s a strong chance mortgage rates will stay low, not just for the remainder of 2021, but even well into the upcoming year. So those who sit tight and wait for home prices to drop won’t necessarily get stuck paying an uncomfortably high interest rate on the money they borrow to buy a place of their own.
View more information: https://www.fool.com/the-ascent/mortgages/articles/71-of-americans-think-home-prices-will-rise-over-the-next-year-are-they-right/