Latest NewsThink Home Prices Are Going To Fall ? Think AgainTuesday, 26 July 2022

Over the last two years, residential property prices appreciated at a dramatic pace. While that led to incredible equity gains for homeowners, it’s also caused some buyers to wonder if home prices will fall.  It’s important to know the housing market isn’t a bubble about to burst, and home price growth is supported by strong market fundamentals.

To understand why price declines are unlikely, it’s important to explore what caused home prices to rise so much recently, and where experts say home prices are headed. Here’s what you need to know.

Home Prices Rose Significantly in Recent Years
The dramatic increase in residential property values over the past few  years encouraged many buyers to reassess their property goals. 
Population was growing at a steady rate and Homeownership suddenly became a priority for many.  This popularity, fuelled by a low-interest-rate environment led to increased competition amongst buyers prices and the FOMO effect.  The Reserve Bank recently succeeded in cooling this heady market by raising rates and the property market has since undergone a sensible correction.  Hence, property values may now not be growing as quickly as previous years, but with Australia's population expected to double within the next 30 years, there is no better opportunity for you to buy your dream home than right now.

You might be asking:  why did home prices climb so much last year? It’s because there were more buyers than there were homes for sale. That imbalance put upward pressure on home prices because demand was extremely high, and supply was record low.

Where Experts Say Prices Will Go from Here
While housing stock is increasing and buyer demand is softening today, there’s still a shortage of homes available for sale. That’s why the market is seeing ongoing price appreciation.  Economist, Mark Fleming,  explains it like this:

“. . .we’re still well below normal levels of inventory and that’s why even with the pullback in demand, we still see house prices appreciating. While there is more inventory, it’s still not enough.”

As a result, experts are projecting a more moderate rate of home price appreciation this year, which means home prices will continue rising, but at a slower pace. That doesn’t mean prices are going to fall.   As Selma Hepp, Deputy Chief Economist at CoreLogic, says:

“The current home price growth rate is unsustainable, and higher mortgage rates coupled with more inventory will lead to slower home price growth but unlikely declines in home prices.”

In other words, even with higher mortgage rates, moderating buyer demand, and more homes for sale, experts say home price appreciation will slow, but prices won’t decline.

If you’re planning to buy a home, that means you shouldn’t wait for home prices to drop to make your purchase. Instead, buying today means you can get ahead of future price increases, and benefit from the rise in prices in the form of home equity.

Bottom Line
Home prices skyrocketed in recent years because there was more demand than supply.  As the market shifts, experts aren’t forecasting a drop in prices, just a slowdown in the rate of price growth. To better understand what’s happening with home prices in your area, connect with your local real estate professional today.

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The information contained and the opinions expressed within this article are not intended to be construed as investment advice.  We do not guarantee or warrant the accuracy or completeness of the information or opinions contained herein.  Accordingly, nothing herein should be construed as investment advice.  You should always conduct your own research and due diligence and obtain your own independent professional advice before making any investment decision.  We will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.