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Two Key Considerations for Potential Homebuyers

When you're contemplating the idea of purchasing a home, it's natural to pay close attention to the prevailing conditions of the housing market. With information flooding in from various sources such as news outlets, social media, real estate agents, and conversations with friends and family, it's crucial to cut through the noise and focus on the most essential factors: home prices and mortgage rates. To help you make an informed decision, let's examine two key questions related to these aspects:


1. Where Do I Anticipate Home Prices to Go?

A reliable source to turn to for insights is the Home Price Expectation Survey (HPES) conducted by Pulsenomics, which gathers opinions from a national panel of economists, real estate experts, and market strategists. According to the latest release, the survey participants project a slight depreciation in home prices for the current year (indicated by the red in the graph below).

However, it's important to consider the context. The most severe declines in home prices are already behind us, and many markets are experiencing appreciation once again. Additionally, the projected 0.37% depreciation for 2023, as indicated by HPES, is far from the crash that some initially predicted.


Looking ahead, the green in the graph below signifies a turning point, with prices expected to appreciate in 2024 and beyond. After this year, HPES forecasts a return to more typical levels of home price appreciation for the subsequent years.


Why does this matter to you? It suggests that if you purchase a home now, it is likely to increase in value, allowing you to build home equity in the coming years. However, if you wait, based on these forecasts, the home will likely cost you more later on.


2. Where Do I Anticipate Mortgage Rates to Go?


Over the past year, mortgage rates have risen in response to economic uncertainties and inflation. Recent reports indicate that although inflation remains high, it has moderated from its peak. This is an encouraging sign for the market and for mortgage rates. Here's why:


When inflation subsides, mortgage rates generally respond by falling. As a result, some experts predict a slight retreat in mortgage rates over the next few quarters, with rates averaging around 5.5% to 6%.


Nevertheless, even the experts cannot definitively predict future mortgage rates due to the multitude of factors that influence them. To gain insight into various potential outcomes, consider the following scenarios:


- If you buy now and mortgage rates remain unchanged: You would have made a wise decision, as home prices are projected to appreciate over time, allowing you to beat rising prices.

- If you buy now and mortgage rates decrease (as projected): Your decision would still be favorable since you would have secured the house before further home price appreciation. Moreover, if rates are lower, you can always consider refinancing your home later on.

- If you buy now and mortgage rates increase: In this scenario, you would have made an excellent decision, having purchased the home before both its price and mortgage rates escalated.


If you're considering buying a home, it's crucial to be aware of the expected trends in home prices and mortgage rates. Although no one can accurately predict their future trajectory, expert projections can provide valuable information to keep you informed. Rely on a trusted real estate professional who can offer an expert opinion specific to your local market.

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