Should Buyers Expect a Home Price Decline?

CoreLogic released their U.S. Home Price Insights report earlier this week. In that report they evaluated April data and made a projection for the year. When comparing month-to-month, CoreLogic saw a 1.4% increase in prices nationwide from March to April. The price increase year over year from April 2019 to April 2020 was 5.4%. These increases run contrary to the downward pressure the coronavirus pandemic is placing on the economy. It is a testament to the significant amount of pent-up demand that exists on the buyer-side of the equation. In the face of a global pandemic and record breaking unemployment, home prices continue to appreciate. In contrast to buyer activity, sellers continue to be more hesitant about listing their properties for sale. The resulting low inventory indicates prices will continue to climb. The low interest rates play into this as well. CoreLogic believes unemployment will eventually be a heavy enough drag on the national economy that will result in a 1.3% decline over the next 12 months. One item of note is that these CoreLogic projections came out prior to Friday’s unemployment numbers. Those Friday numbers contradicted nearly all economists’ predictions and saw unemployment slightly improve across the country.

I find it difficult to make strong predictions of where our local market is headed when weighing the influencing factors. On one side you have low inventory levels paired with low interest rates. On the other side you have high unemployment and the threat of a second coronavirus wave. The current low interest rates improve a buyer’s purchasing power, and I encourage buyers to take full advantage of those rates. But the low inventory may be forcing buyers to make concessions on their wish lists, and that could result in buyers remorse down the line. Should you then decide to wait out the market? Keep in mind that CoreLogic’s pojected 1.3% decline means that a $400,000 priced home today will be a $394,800 priced home in 12 months. What if during that same time frame, interest rates increase from 3% to 3.75%? While the sales price has gone down, your monthly payment obligation has gone up. My best advice is to be disciplined in your approach. Have all your ducks in a row by talking it over with your team of professionals (your loan officer and your Realtor). This will help you to determine what is best for you and your situation.