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Four Different Reasons Why Home Prices Will Fall These Coming Years

The real estate industry is in constant change, which can make it difficult to keep up with the latest trends. However, one trend is changing the industry and the country forever, and that is the rising home prices.

Home prices now average around $390,000. This is a massive problem for many people. High home prices make it difficult to buy a home, making it difficult to sell a home. This can create a lot of stress for people trying to buy or sell a home.

It can also make it difficult for people to move to another city or state if they need to. High home prices can also make it difficult for people to retire. This is because they may not be able to sell their home for as much as they paid for it, and they may not be able to afford the monthly payments on a smaller home. There are many other problems that high home prices can cause, but these are just some of the most common ones.

However, there might be light at the end of the tunnel. Experts believe that there are a couple of reasons why home prices will decrease in the coming years. One of them is due to a recession.

Economic recession

An economic recession is one of the main reasons home prices will be lower in the future. A recession occurs when there is a decrease in the Gross Domestic Product (GDP) for two consecutive quarters. This usually happens when there is a decrease in consumer spending, an increase in unemployment, and a decrease in business investment. An economic recession is possible due to the pandemic but is still unlikely.

Some experts believe that an economic recession is enough to change the entire market. For example, when people lose their job, they will be less likely to buy a home. Also, during a recession, businesses tend to invest less money, leading to a decrease in the demand for housing. However, it is essential to note that not all recessions lead to a decrease in home prices.

It is also worth noting that even if there is an economic recession, it might not happen immediately. It could take years for a recession to be felt in the housing market. Another reason home prices may fall in the future is changing demographics.

Millennials delaying homeownership

One of the most significant changes in demographics is that millennials are delaying homeownership. In the past, most people bought a home in their 20s or 30s. However, millennials are waiting longer to buy a home. The average millennial is now 33 years old before purchasing their first home.

There are several reasons for this change. First of all, many millennials have a lot of student debt. According to CNBC, the average graduate has $28,650 in student loans. This can make it challenging to save up for a down payment on a home.

Many millennials are also choosing to start their businesses. This can also make it difficult to save up for a down payment on a home. Lastly, many millennials are waiting to get married and have children before buying a home.

This change in demographics is significant because there will be fewer first-time homebuyers in the market. This can lead to a decrease in demand for housing, leading to a decline in home prices. Mortgage companies are looking to market to millennials by adding more to their mortgage offers, such as business loans. However, many are still wondering if it’ll be enough to get millennials to buy homes. Another reason home prices may fall in the future is that the home shortage is being dealt with.

More houses are being built

The housing shortage is one of the main reasons why home prices have been so high in recent years. This is because there are not enough homes to meet the demand. However, this is starting to change.

More and more homes are being built each year. In 2018, 1.3 million new homes were built. This was the most that had been built in a decade. The trend is expected to continue in 2019 and 2020. This increase in the number of homes being built will help to meet the demand and could lead to a decrease in home prices.

Interest Rates are Scaring Homebuyers

Lastly, interest rates are scaring homebuyers. In recent years, interest rates have been rising. This makes it more expensive to borrow money to buy a home.

The average 30-year mortgage rate was 3.99% in 2018. This increased to 4.54% in 2019. The trend is expected to continue in 2020, with the average 30-year mortgage rate reaching 5.0%.

As interest rates continue to rise, it will become more and more expensive to borrow money to buy a home. This could lead to a decrease in demand for housing, which could then lead to a decrease in home prices.

The Bottom Line

There are several different reasons why home prices may fall in the future. These include an economic recession, changing demographics, the increasing number of homes being built, and rising interest rates. While it is impossible to say for sure if home prices fall, it is something that you should be aware of if you are thinking about buying a home in the near future.

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