Home Prices Are Falling. Should You Buy Now?

To view this email as a web page, click here.

What's Happening Today

Do you want to buy a house? If so, you've probably been waiting for home prices to "bottom out"—to fall to their lowest point before rising again. Well, I have good news for you: It looks like home prices have peaked and are steadily making their way back toward Earth.

According to today's Case-Shiller Home Price Index, September's home prices were up 10.6% compared to last year. And while that's still high, it's a drop from August, when home prices were 12.9% higher year-on-year.

Despite the overall price growth deceleration, if you're waiting for home prices to fall to the same levels as before the pandemic, you might be waiting a while (and perhaps, even forever).

Mortgage rates have been throwing cold water on the real estate market, causing prospective home buyers to wait on a purchase. The current interest rate on a 30-year loan sits at 6.58%, a drop from 7.08% just two weeks ago. But rates are still well above the 3.22% you could have gotten if you bought a home in January.

So what does this mean if you want to buy a house? There may be light at the end of the tunnel—at least when it comes to home prices. And depending on how high the Federal Reserve hikes rates at its next policy meeting, we could see higher mortgage rates which could send home prices even lower. If you can afford to wait, it could mean big savings.

Decelerating home prices might make you want to buy, but it is happening at a time when consumers aren't feeling too great about their finances or the economy. The Consumer Confidence Index declined again last month to a score of 100.2, dropping two points since October. Short-term outlooks on the economy also declined, as gas prices rose and the threat of an upcoming recession still looms.

-Kristin

Editors' Picks

Adobe Report: Cyber Monday Sets Sales Record as Shoppers Splurge on Toys, Electronics (Yahoo Finance)

Fed To Get Some Help in Pausing as Inflation Gauge Gap Shrinks (Bloomberg)

Yield Curve Inversion Reaches New Extremes (The Wall Street Journal)

Collecting Social Security Early Costs Workers $225,944 (The Balance)

When Does Social Security Pay Monthly Benefits? (The Balance)

What Is the Average Millennial Income? (The Balance)

Things You Need To Know Before Getting a Mortgage (The Balance)

Term of the Day

Mortgage

A mortgage is a specific type of loan that's used to purchase a home or a piece of real property. Mortgages are offered by banks, credit unions, and other financial institutions across the country.

Your lender—the bank or institution loaning you the funds—actually pays for the property outright when you use a mortgage to purchase a home. You then pay those funds back to the lender, plus interest. Borrowers typically make a payment each month over the length of the loan.

Mortgage lenders often differ in fees, closing costs, and even the interest rate they're able to give you, so it's important to shop around and get several quotes before deciding who will originate your loan. You should also ask about the down payment and any private mortgage insurance you'd be required to pay, because this will impact your upfront and long-term costs as well.

Off the Charts

Some cities are still seeing hot housing markets that have sent home prices soaring, according to the Case-Shiller Home Price Index. If you're living in Miami or Tampa, prices are more than 20% higher than last year, while Charlotte's home prices are nearly 18% higher.