Corelogic predicts that there will be price reductions in their new article while Redfin foresees inflation. So is it a good time to buy?
With more and more people talking about the most likely slow down or crash, why in the world would you buy a house now?
Lets take a look at Corelogics article from March 16 – Potential Risks of Price Declines in the Real Estate Market
And Redfin’s from March 24, 2022 Housing Market Update: Prices Reach New High as Few Americans Put Homes Up for Sale
Compare the same house that sold in 2008-2010 and sold again in 2021-22 and see if you should buy a house now or wait.
Before we start, I do want to emphasize that real estate is very localized, so always ask your local realtor what is happening in your market before making any decisions.
On March 16, Selma Hepp, a Corelogic Economist, discussed the potential risks of price declines in the real estate market. She starts by saying that prices are continuing to reach new highs and the market is showing few signs of slowing down in most of the country’s metropolitan areas.
She goes on to say that home price growth surged to a 15% annual increase from 2020.
This is triple the average rate seen in the decade prior.
Although home price gains are expected to slow in 2022 and average a little less than 10% growth for the year, the recent rapid acceleration in prices has led to overvaluations in some markets, therefore pushing up the risk of price decline in the year ahead.
So, let’s take a look and see where Corelogic thinks a price decline will take place.
She mentions that certain areas are overvalued due to rapid price growth.
But concludes that nevertheless, the risk of price declines remains low.
According to the December CoreLogic Market Risk Indicator, only 12 metro areas had over a 50% probability of a price decline in 12 months. One-third of the metro areas had a less than 10% probability of a price decline.
If you look at their map, they do cite several areas in the US that they think have a high (50-70%) chance of a price decline in the next 12 months.
If you live in one of these areas noted here, Please comment below and let us know what you think is happening in your area.
Hepp concludes that although some areas that are considered overvalued, they still have a low risk of price decline because of their low unemployment rate and stronger income growth largely brought on by in-migration of populations with higher incomes and solid housing starts.
So although Corelogic is more conservative than other market forecast predictors (Zillow), they still see a 10% price appreciation in most states and do cite some areas that may see a correction in the next 12 months.
Redfin’s chief economist, Daryl Fairweather, says that even with higher interest rates and higher prices (up 17% year over year to a new high), the lack of inventory keeps the market a strong sellers market.
“With so much uncertainty in the world and economy, it makes sense that homeowners are staying put,” said Redfin Chief Economist Daryl Fairweather. “High prices and rising mortgage rates are a strong impediment even for homeowners who would ideally like to move to a better home. First-time homebuyers, on the other hand, are still seeking the security of homeownership despite the chaos of this market.”
I’ll add that all of the homeowners who refinanced in the last 2 years who may have wanted to sell up upsize or downsize are also staying put which limits the inventory for current buyers.
On March 17, CNBC asked Redfin CEO Glenn Kelman what he thinks will happen with the housing market.
So, to sum it up, both Corelogic and Redfin think the market will continue to rise although may not appreciate the same way it did in 2021.
In my last video, I went through my rent vs own scenarios and concluded if you can afford to buy right now, you should.
I got a lot of backlash for this video (which is fine- I want to hear from you) but I also wanted to clarify what I’ve said all along which is in an escalated, seller’s market – if you plan on living in your house for some time, its totally fine to buy now. Let me show you some examples:
Take a look at these homes and the prices they sold for in over the years.
5802 Anniston Rd in Bethesda sold for $635,000 in 2009, $725,000 in 2017 and $925,000 in 2021.
9906 Belhaven in Bethesda was sold in 2009 for $610,000. In 2016 (7 years later), it sold for $785,000. In 2021 it sold for $865,000.