When are housing prices going to return to normal?

For those that have been sitting on the sidelines, watching what’s happening in the market. Are you thinking to yourself “gosh I should have bought a house last year or a few years ago!” Remember, hindsight is 20-20 and you can’t regress you can only go forward. So, when are housing prices going to return to “normal”? We need to be clear about what the new normal is and what that looks like for buying a house. Here are things you should consider as it relates to when housing prices are going to return to normal.

 

One of the fundamental things that drive the housing market is jobs. People feel optimistic when they have security at home and part of that security at home is having an income. An excellent job and a stable foundation are two paramount things for most families who buy homes. In other words, you don’t buy a home if you’re feeling shaky about your job or your income, right? After all, buying a home is a very permanent thing. This goes hand in hand with unemployment. The more people who are working, the more job growth. The more jobs that are created, the more housing prices will continue to rise over time which statistically supports about a 1% annual appreciation rate. Doesn’t always work out this way but that’s generally the consensus. If you look at the last 12 months dating back into 2021-2020 with the pandemic housing prices shot up because more people can work from home and new job opportunities were created. While families had problems associated with COVID, others had exuberant growth which supported strong housing in the last two years.

Now we’re in 2022 and real estate prices are still reeling from the effects of the pandemic. For housing prices to come down two things must occur. Number one more supply. To get more supply of homes available on the market there needs to be a driver or a catalyst. The only driver and catalyst of supply is unemployment. When the unemployment rate begins to grow and more people off of their jobs rises costs. This is happening right now because of inflation. That could signal more homes available for sale on the market which increases supply. Creating less demand for housing since fewer people are working to afford it. If you multiply that a million times across the United States, the math always holds. The law of demand is the same in real estate as it is in the economy. It’s reasonable to think housing might level off and not grow at the rate at which it has in the last 24 months. But housing prices to come down must have supplied. Without supply, a slowdown or a reduction in real estate prices nationally might happen but it’s extremely unlikely.

So, what does this mean for homebuyers going forward as it relates to a budget and spending? It boils back to the golden rule. Make sure you have the economic means via cash, credit, and income to support a housing payment. Families who have a strong job and/or a strong financial foundation, they’re feeling good about their income and finances. Those people are going to do exponentially well as 80% of people who buy homes do if they have a long-term buy-and-hold strategy in place.

The opportunity to buy a home after refinancing that home lowers the interest rate, and/or get rid of PMI and get cash out, pay the debt, or do home improvement projects. The fundamental element that is a huge driver of the desire of buying a home for families in America is that real estate is the second driver of wealth in America today and has been for the last 40 years. Owning a home and having a retirement account that you contribute to will make you wealthier over time. If you’re thinking about buying a home and want to learn or understand the pros and cons of how a mortgage payment could be woven into your payment cash flow goals start today with a no-cost loan quote!

RELATED MORTGAGE ADVICE FROM SCOTT SHELDON

A wallet containing colorful credit cards with a bold text overlay reading "Refinancing Strategies to Reduce Credit Card Debt and Buy a Home – Refinance" against a blue background.

Refinancing Strategies to Reduce Credit Card Debt and Buy a Home

Refinancing Strategies to Reduce Credit Card Debt and Buy a Home If you’re sitting on…

When buying a home, it’s natural to want the lowest mortgage rate possible. But sometimes, chasing a slightly better rate from another lender—especially after your offer has already been accepted—can backfire in a big way. Let’s walk through a real-world scenario. You’ve got an offer accepted on a house. You’re working with a lender who has you approved, documents in underwriting, and a 21-day close of escrow in place. Everything is moving forward. Then you hear from another lender offering a rate that’s 0.25% lower, with slightly better closing costs. It’s tempting. But before you make a jump, here’s what you need to consider. Switching Lenders Comes with Time Costs When you pivot to a new lender mid-contract, they’ll need to: Re-underwrite your entire loan, Order a new appraisal, Disclose and sign new loan documents, Submit the file for final loan approval, Schedule and fund closing—all over again. This doesn’t happen overnight. Even in ideal circumstances, the new lender is likely going to need at least 25–30 days to close. If you’re in a fast-moving or competitive market, this is a real problem. Most sellers won’t grant a contract extension just because you’re switching lenders. So, what happens next? A Contract Extension Can Jeopardize Your Deal Asking for a contract extension means the seller must agree to delay closing. But that delay introduces risk—especially if the seller has backup offers or simply wants certainty. They may not grant the extension. Or worse, they could cancel the deal outright and take another buyer’s offer. Even if the seller agrees to extend, your earnest money and negotiation power could take a hit. And for what? A slightly lower rate that might save you $50 to $75 a month? Mortgage Rates Aren’t as Far Apart as You Think Here’s the truth: all mortgage lenders get their money from the same place—the bond market. The pricing differences between lenders usually range from 0.125% to 0.25% in rate on any given day. If one lender seems to be offering dramatically better pricing, the first thing you should ask is: How? Head over to FreddieMac.com and check the average 30-year fixed rate posted weekly. This is one of the most reliable benchmarks for where rates truly stand in the market. If a lender is quoting you a rate that’s well below that average, ask for the details: Are they charging extra points? Is this a teaser rate with a prepayment penalty? Is it based on a different loan product or risky structure? Often, what sounds “too good to be true”… is. Consider the Bigger Picture Think long-term. If you’re financing $600,000, a 0.25% lower rate may reduce your payment by roughly $75/month. But what if you lose the house and have to start over? That monthly savings doesn’t mean much if you’re outbid on your dream home or lose your deposit. Also, remember: you’re not going to keep this rate forever. Today’s homebuyers typically refinance when rates drop by about 0.75% or more. So if rates fall within the next year or two, you’ll likely be refinancing anyway. Instead of paying extra points now or risking the entire deal for a minor monthly savings, it may be better to accept a slightly higher rate—knowing you’ll refinance when the time is right. The Real Risk Isn’t the Rate—It’s the Delay When shopping for a home loan, don’t just ask, “What’s your rate?” Ask: Can you close on time? Is this rate sustainable or based on hidden costs? Will switching lenders delay or jeopardize my contract? A home purchase contract is a binding agreement between you and the seller to perform within a set timeframe. If you can’t meet those dates because you're chasing a slightly better rate elsewhere, you may want to reconsider if now is the right time to buy. Final Thoughts Yes, interest rates matter. But execution matters more. Before making a switch mid-transaction, talk to your lender. Have an honest conversation about pricing, timelines, and strategy. You might find that staying the course, securing the house, and planning to refinance later offers a better path to financial security. Want to Know Your Options? Let’s compare rates and strategies the smart way—without risking your dream home. 👉 Click here to get a custom rate quote today.

The Risks of Chasing a Lower Mortgage Rate

Why Chasing a Lower Mortgage Rate Can Backfire When buying a home, it’s natural to…

A woman sitting at a kitchen table looking through documents with an American flag and framed military photo beside her, symbolizing a surviving spouse exploring VA loan options.

VA Loan Options for Surviving Spouses

Understanding VA Loan Refinance Options for Surviving Spouses Losing a spouse is one of life’s…

View More from The Mortgage Files:

begin your mortgage journey with sonoma county mortgages

Let us make your mortgage experience easy. Trust our expertise to get you your best mortgage rate. Click below to start turning your home dreams into reality today!