Home buyers may be about to catch a break

Yahoo Finance's Rick Newman discusses how home prices may start coming down as rising mortgage rates weigh on the market.

Video Transcript

- The housing market is finally showing signs of cooling off with, US home prices posting their biggest monthly drop since 2009. But could the US turn into a buyer's housing market next year? Yahoo Finance senior columnist Rick Newman is here. Rick.

RICK NEWMAN: Not anytime soon. But I think it's coming. And I think this should be heartening news for homebuyers who just have felt they've been priced out for the last couple of years because we've had this insane run up in home values. So what I'm encouraging people to do in a story that we just published on the Yahoo Finance website is look at the longer term trend in home prices that you see right there. This big run up we had from 2020 to 2022, we had home price appreciation that was even greater than what happened during the big housing boom from 2003 to 2006.

And then if you're looking at that chart, look what happened after the housing boom. We had a big decline in prices. So could that be coming during the next couple of years? We probably are not going to have a housing crash like we did from 2007 to 2011. And I don't think we're going to see big price dips like we saw back then. But I think there is definitely a strong case for prices to moderate and maybe even come down a little bit. So the data is telling us that home prices have peaked.

You guys were just talking about the affordability problem because we have home values still at high levels. And mortgage rates are now expensive. But this could change over the next couple of years. So I think there might be finally some good news for homebuyers on a budget out there who have been looking at this market for the last couple of years and saying, I'm never going to be able to buy a house. Maybe you will.

- OK. And so it would pivot, perhaps, in this scenario into a buyer's market. But what does that mean for people looking to list their homes and that were looking at the environment? And even now, as there are less bids that are coming in on the existing homes that are out there, what does that mean for the inventory that would then come on the market?

RICK NEWMAN: It's the hot market for sellers that we saw certainly during the first year of COVID and probably for another year after that. I mean, that seems to be winding down. So sellers probably have to have realistic expectations at this point. We may be past the point where you put your home on the market and the first day you get 10 cash offers for 20% more than you listed the home for. That probably is over in most markets.

So I think what's going to happen is we're going to get back to what is something like a normal housing market. It's not normal for prices to go up 20% a year, which is what they've been doing for the last two years. What's normal is prices might go up around 3% or 4% per year. And when you put a home on the market, it might take a month or two to sell it. And you might have to negotiate with the seller. That has not been happening for the last two years.

And I don't think it's going to change overnight. But we are finally seeing the fever breaking, if you will, as these home price gains on a month to month basis start to fall a little bit. So buyer's market possibly on the way.

- Yahoo Finance's Rick Newman giving myself something to perhaps rejoice about in the future if I'm able to get into that affordability equation there. Rick, appreciate it.