Waiting for Prices to Fall May Not be a Good Idea

The housing market is slowing with sales declining and home prices softening. Home sales in California dropped 31.1% year over year in July 2022 and last month was the third consecutive month with sales falling more than 10% from a year ago.

Current Market Conditions

Prices also began to moderate in the past couple of months after the statewide median price set a record high in May. The July median price of $833,910 in California was the lowest in five months. With rates rising and the economy slowing, the downward shift in the housing market will continue as the year approaches its holiday season.

Why Waiting May Cost More

Buyers waiting for prices to fall could end up paying more on their monthly mortgage payments because of the higher interest rates. For example, a buyer who purchased a median-priced home and financed it at July's prevailing 30-year fixed rate of 5.41% with a 20% down payment would have a mortgage payment of $3,750.

If the buyer were to wait and purchase the same property next year with a price drop of 10% and finance it with a 30-year fixed rate that is one percentage point higher than today's rate, the mortgage payment would turn out to be $10 higher.

With prices not expected to drop low enough to offset a higher interest rate, it may not be a good idea for buyers to wait until next year if they find a property that they like and are financially ready to buy.