House

As U.S. house prices fall, should you consider purchasing a home now or wait for further price declines? In Washington State, the median house price has dropped 12.7% from its peak in April 2022. This may make it seem like a good time to buy, but it may be wise to wait until home prices stabilize and reach their expected level for the current mortgage interest rate. There tends to be some lag in the decrease of home prices as it takes a while for the market to adjust and find the new true market price.

In Washington State, for example, the median home price peaked in April 2022 at $650,000, according to Redfin. Based on historical trends and the mortgage rate increase from 3.0% to 7.5% for a fixed-rate mortgage, we can expect the median home prices in Washington State to go down to around $450,000, which is a decrease of about 30%. Therefore, it is likely that we have not yet reached the bottom of the market.

One potential benefit of decreasing house prices is that it may make it easier for more people to afford a home. As prices drop, the cost of purchasing a home may become more manageable for those who may have previously been unable to do so.

For those who take out a mortgage to buy a home during a period of decreasing house prices, it is worth noting that the mortgage payment will be the same regardless of the house price. However, the amount that the borrower will eventually owe to the bank will be smaller due to the lower price of the home. This means that the borrower will end up paying a lower total cost for the home over the life of the mortgage, even if they have a higher mortgage rate.

However, it is important to consider that while decreasing house prices may make it easier for some people to buy a home, it can also be a source of financial strain for those who already have a mortgage. If house prices decrease significantly, homeowners with a variable rate mortgage may end up paying more on their mortgage compared to those with a fixed rate. This is because a variable-rate mortgage is tied to the market interest rate, which can fluctuate based on economic conditions. If interest rates rise while house prices are decreasing, homeowners with a variable-rate mortgage may find themselves paying more on their mortgage than they would have if they had chosen a fixed rate.

Additionally, homeowners who purchase their home during a period of high house prices may see the value of their home decrease if prices fall. This can be a source of concern for those who may be looking to sell their home in the future, as they may not be able to recoup their original investment.

To sum up, although house prices across the U.S. have significantly fallen, it is a good idea to wait until they stabilize before making a decision on whether to purchase a home. It is important to carefully consider your own financial situation and the potential risks and benefits of buying in a declining market.

By Eden Reports

Eden Reports is a Seattle-based news reporter with a focus on a wide range of topics, including local news, politics, and the economy.

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