Pre-Pandemic Home Prices: What This Means for Buyers

In mid-2020, home price growth reached historic levels, with the year-over-year (YoY) index demonstrating a huge increase in property values. For much of the pandemic, mortgage rates were also at near-historic lows, which helped to offset some of the impacts of rapid home price growth.

However, when rates skyrocketed upward, many people found that they had far less buying power. The combination of high rates and soaring prices has created a difficult market. 

Fortunately, home price growth has finally stabilized at pre-pandemic levels. Here’s what that means for your home-buying aspirations.

What’s Going On With Home Price Growth?

The YoY home price growth index compares good prices in the current month to the same month one year prior. For example, if the YoY U.S. house price index indicates a 10% change in January 2024, it means that prices have increased by 10% compared to January 2023. It’s a good tool for measuring inflation and general price rises.

In June of 2020, the YoY house price index indicated a change of 5.55%. By October 2020, the index had climbed past 10%. The index peaked in February 2022 at 18.71%. Overall, the home price growth rate remained in the double digits for 24 consecutive months, resulting in a huge rise in house costs between mid-2020 and mid-to-late 2022. 

In mid-2023, the growth rate dipped below 4%. Since then, YoY increases have stabilized, remaining between 5%-7%. 

As a result, you shouldn’t expect to see any major spikes in pricing in the coming months. While real estate values are almost always trending upwards, the increase should be more steady than it has been over the last few years.

However, it’s unknown how long this shift will last. Experts cannot determine whether the market will experience another big uptick in the back half of the year. 

Is the Current Market for Homebuyers Better? 

Yes, but it’s far from what we would call a “buyer’s market.” The combination of high mortgage rates and rapid rises in price creates adverse conditions for those wanting to become property owners. While home price growth rates have slowed, interest rates remain extremely high. As of April 12, 2024 national average rates for a 30-year fixed rate mortgage are 7.03%.

However, you have more negotiating power than you did a few years ago. Since home prices aren’t increasing as quickly, there’s also a reduced sense of urgency. While a property will be more expensive six months from now than it is today, there shouldn’t be a huge gap in those prices due to the decreased growth rate.

Overall, market conditions are finally swinging back toward buyers. Still, it’s important to carefully weigh your options and align yourself with experienced industry professionals before you begin house shopping. After all, buying a home is the biggest financial decision you’ll ever make. 

Should You Buy Now? 

Becoming a homeowner is a huge decision, one that you can’t take likely. It is also a highly personalized process. The current market for homebuyers does offer some favorable conditions in spite of the high interest rates.

Rising rates and home values have reduced competition and created a more neutral market. As a result, many sellers are open to offering concessions, such as paying for repairs, covering closing costs, or giving credits to buy down your interest rate. These concessions can make purchasing a home more affordable. 

If you’d like to explore your options and see if now is a good time for you to buy, connect with an experienced agent and lending partner. Together, the right agent and a customer-focused mortgage team can help you make an informed decision and achieve your goals of homeownership.