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October Saw Big Home Price Gains, Reports FHFA

The Ascent logo The Ascent 12/29/2021 Maurie Backman
a man holding a pair of people posing for the camera: A young man and woman speaking with their realtor who's holding a tablet in an open house. © Getty Images A young man and woman speaking with their realtor who's holding a tablet in an open house.

It's been a challenging time for home buyers. Low inventory has made finding a home difficult, and high home prices have forced many would-be buyers to put their plans on hold.

In October, home prices rose 17.4% compared to the same month a year ago, according to the most recent Federal Housing Finance Agency (FHFA) House Price Index. Compared to September, home prices were up 1.1%.

A great time for sellers, but not for buyers

Sellers today have a big advantage over buyers. Not only are they able to command higher prices for their homes, but they're also seeing homes fly off the market quickly.

Buyer demand has been high despite low inventory and inflated home prices. That's because mortgage rates have been sitting near historic lows all year.

Should you pause your home search?

If you've been trying to buy a home, you may be growing increasingly frustrated by the week. Unfortunately, the housing market may not open up all that much for a while.

A big reason home prices are so high right now is that buyer demand is far exceeding the supply of available properties. And until more homes hit the market, things could easily stay that way.

But more homes may not hit the market soon. First, historically, winter is a sluggish season for new home listings. The weather is bad, it's hard to show off curb appeal, and the holidays can be a distraction.

Second, a lot of sellers have held off on listing their homes due to general economic and pandemic-related uncertainty. And things aren't exactly looking rosy with regard to the latter.

Right now, COVID-19 cases are soaring, fueled by the highly transmissible omicron variant. Thankfully, so far, the economy hasn't reacted. But if restrictions are imposed to curb the spread of the outbreak, even at just the local or state level, we could see joblessness tick upward and consumer spending stall. Sellers may not be so eager to list their homes under these circumstances.

If you've been struggling to find a suitable home to buy, you may want to pause your search until mid-2022. Doing so gives you an opportunity to sock away more money for a down payment and give yourself more leeway if home prices remain high six months or so down the line.

How high will home prices go?

The FHFA has yet to publish data on home price growth for November or December, as it still needs to be compiled. But it wouldn't be shocking if October's home price gains are indicative of what will register for the last two months of the year.

At the same time, it also wouldn't be shocking to see more buyers pull out of the market in the coming months, fueled by frustration more so than anything else. That would, in turn, lessen the competition and potentially result in a modest downtick in home prices. But that buyer pullout would need to happen on a large scale to have a substantial impact on home values.

A historic opportunity to potentially save thousands on your mortgage

Chances are, interest rates won't stay put at multi-decade lows for much longer. That's why taking action today is crucial, whether you're wanting to refinance and cut your mortgage payment or you're ready to pull the trigger on a new home purchase. 

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