Here’s what you need to know about prices in our current market.
Are homes overpriced? Have you been out looking to purchase a home recently? You may have seen several and thought that they were overpriced. Are they really? It’s no secret that the housing market went crazy in the wake of COVID. Between the crazy low interest rates and really high buyer demand, prices did skyrocket. Now that the post-COVID market has started to normalize, I’m seeing more people commenting that certain homes are overpriced, so let’s break things down.
The first thing we have to consider is inflation. With skyrocketing inflation, prices for everything have increased dramatically. When you look at the cost of essential goods like eggs, would you also say they are overpriced? You might, but would you stop buying eggs? Some would, but the reality is that people are still buying even at their current prices.
It’s a fact that prices have stabilized, and the number of home sales has declined. This is because affordability was dramatically affected by the doubling of interest rates over the last year. This has made the monthly payment on an average home several hundred dollars more expensive in the eyes of the purchaser.
“A home is only overpriced if you aren’t willing to pay for it.”
This may make houses seem overpriced, but are they really? Probably not. The simple truth is that Realtors continue to look at the same recent comparable sales they have always been when deciding on pricing strategies. Even with the doubling of mortgage rates, prices are still modestly increasing, and if a comparable home sells for a certain price, that price would be a fair range for a similar home in the same area.
For buyer demand to have a significant impact on home prices, it would have to be dramatically more intense. Just like in the example of eggs, there aren’t enough people not buying eggs to cause prices to fall or even stall. While some buyers have left or even sadly been priced out of the market, there hasn’t been enough large-scale consumer pullback to have a negative impact on prices.
The good news is that inflationary pressure is decreasing, meaning interest rates are somewhat declining. If that trend continues, it would be great for real estate in general. That said, don’t expect interest rates to return to that 3% range any time soon.
At the end of the day, that home you’re looking at is only overpriced if you aren’t willing to pay for it. If you need help finding a home that fits your budget, please call or email me. I’d love to help you navigate this real estate market.
