For people thinking of selling their house, it might pay to wait a few more years.
Housing prices around the country have been rising at a dizzying pace since the pandemic, increasing 6% on average in just the last year. With these rapid increases, homeowners can command a pretty penny in today's red-hot housing market.
But according to Bank of America, there's still room for prices to go higher.
In a recent note, Chief US Economist Michael Gapen and his team revealed that they expect home prices to rise by 4.5% this year and 5% in 2025. Gapen doesn't foresee the market cooling down until 2026 at the earliest. With this in mind, current homeowners can sell for even higher prices down the road.
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Patience is a virtue
There are a couple of reasons homeowners should wait to sell.
First, Gapen believes pandemic effects are still working their way through the economy and won't fully dissipate until the end of 2025.
In addition to widespread inflation, the pandemic also spurred longer-lasting housing trends. Increased work from home and migration to suburbs led to a spike in housing demand, especially outside metropolitan areas. Gapen sees these trends as permanent changes that will continue to drive demand for housing and push prices up.
Mortgage rates are another consideration that prospective home sellers should keep in mind. Many homeowners took advantage of the low rates during the pandemic and refinanced their mortgages for as low as 3%. With current mortgage rates hovering around 7%, it's more favorable for existing homeowners to wait and continue taking advantage of a lower effective mortgage rate.
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Although the Fed is expected to cut rates later this year, Bank of America doesn't foresee mortgage rates falling much in the near future. In fact, the bank predicts that it could take anywhere between six to eight years for the gap between the effective and fixed mortgage rates to close. This creates an environment where it's more beneficial for existing homeowners to stay put.
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Prices could increase beyond 2026
In this market, homeowners can take advantage of at least two more years of price appreciation. If pandemic effects do fade by the end of 2025, Gapen predicts that the housing market could cool to a rate of 0.5% growth by 2026. By then, less restrictive monetary policy, greater inventory of homes, and a stronger macroeconomic environment should open up the housing market and normalize home prices.
However, there's a chance that prices could continue to expand well past 2026, too.
In the long run, home prices are closely correlated to growth in real personal disposable income. But according to the bank, "home prices tend to have strong inertia," meaning that prices can continue to rise above fundamentals for prolonged periods of time before finally recalibrating.
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As seen in the graph below, home prices have historically followed disposable income trends but go through periods of over or undershooting.
For homeowners, this inertia means that there's even more opportunity for price appreciation.
According to Gapen, in a scenario where pandemic effects fade slower than expected and the housing market exhibits high inertia, home prices could rise up to 5% in 2026.
Additionally, demographic shifts in upcoming years will provide a secular boost to housing demand as millennials reach homebuying age. Millennials now outnumber baby boomers and have overtaken them as the biggest group of homebuyers, according to the National Association of Realtors.
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Given these circ*mstances, homeowners should be in no rush to sell.
The pandemic-driven boost to prices should last until at least 2026, according to Bank of America. Housing prices are rapidly rising, and there's room for them to go even higher, according to Michael Gapen. The bank predicts that home prices will rise 4.5% in 2024 and 5% in 2025.
In a recent note, Chief US Economist Michael Gapen and his team revealed that they expect home prices to rise by 4.5% this year and 5% in 2025. Gapen doesn't foresee the market cooling down until 2026 at the earliest. With this in mind, current homeowners can sell for even higher prices in the future.
When is a good time to wait? Rising mortgage interest rates often mean a smaller pool of buyers who can afford the price you want. Selling a home isn't free, so if you can't maximize your price, you might want to wait. If you recently refinanced your mortgage, it may not make financial sense to sell just yet.
One of the main reasons we're unlikely to see the housing market crash in 2024 has to do with housing inventory. The U.S. simply does not have enough homes to meet demand, so prices are likely to continue rising.
The pandemic-driven boost to prices should last until at least 2026, according to Bank of America. Housing prices are rapidly rising, and there's room for them to go even higher, according to Michael Gapen. The bank predicts that home prices will rise 4.5% in 2024 and 5% in 2025.
One of the best ways to get more cash coming into your business is to increase prices. It widens your margins and frees up money you might need for business growth. You should raise prices occasionally, even if it's just to keep up with inflation.
2024 hopes to be a soft recovery of the housing market in many categories. Interest rates, supply, and inflation will all be pulling the market's strings, as will the job sector. If you seek affordability, The Jamison Team can point out where it is.
Will mortgage rates come down in the next 5 years? Lord: “For the rest of 2023, I predict rates for the 30-year fixed-rate mortgage will average 7.3%, followed by 6.1% in 2024, 5.5% in 2025, 5% in 2026, 4.5% in 2027, and 4.5% in 2028.
April, June, and July are the best months to sell your house in California. The median sale price of houses in June 2023, was $796,400, which is expected to grow more in 2024. However, cities like Arcadia and San Mateo follow an upward trend throughout the year.
The influential Mortgage Bankers Association is forecasting that mortgage rates will hit 6.1% by the end of 2024. This creates a more favorable climate for real estate transactions. Prospective rate drops encourage more buyer activity in the market, getting buyers off the fence and actively planning a purchase.
There are lots of ways selling your home can improve your financial situation, and that's a great reason to sell. But if selling your house would make your financial situation worse—either by sinking you further into debt or drastically increasing your payments—stay put.
Rising Mortgage Rates: While mortgage rates are already nearly 8%, some experts predict further increases in the first half of 2024. Selling now could ensure you lock in a potentially lower rate for your next purchase, depending on your financial situation.
On one hand, buying now may offer advantages such as low interest rates and potential appreciation. On the other hand, waiting for a recession may present opportunities for lower prices and a buyer's market. It's crucial to weigh these pros and cons and assess your personal situation before making a final decision.
It could take until 2026 to see a 'normal' real estate market. To get affordability back to a comfortable range will take a combination of higher wages, lower interest rates and stable prices, economists say, and that combination may take until 2026 or later to coalesce.
Although a recession is no longer predicted, economic growth is expected to decline from 2023's fairly robust rate of 2.5% to 2.1% in 2024 and 2% in 2025.
While it may show bubble-like characteristics, Yun does not expect the residential real estate market to burst. He does predict that sales will be at a low point next year, with only 5.3 million units sold, but he foresees a gradual increase afterward, up to an annual 6 million units by 2027.
However, purchasing a house now may be more affordable than purchasing one in the future as long as inflation is expected to continue increasing. Rising inflation means higher home prices, but it also means that you can purchase a home for cheaper now than in the near future.
Introduction: My name is Lakeisha Bayer VM, I am a brainy, kind, enchanting, healthy, lovely, clean, witty person who loves writing and wants to share my knowledge and understanding with you.
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