What's My Payment?

Is the Housing Market Cooling Down?

The housing market has been scorching hot and there are signs it could be cooling. Is there an opening for homebuyers to finally find a deal?
Is the Housing Market Cooling Down?
Profile Image


Ryan Martinson
Oct 15, 2021·2 min read

Are home prices coming back down to Earth?

If you’ve paid attention to the price of homes the last few years, you’ve probably shaken your head once or twice when a property comes for sale with a jaw-dropping list price. What’s more is the disbelief when you learn that home sold for MORE than its asking price.

There is story after story of how aspiring homeowners found their dream home, only to see it sell to an investor or cash buyer for far more than the prospective buyer was prepared to pay. The bidding wars created a property boom that has seen home values skyrocket. Many homebuyers who were priced out have been patiently waiting for prices to cool. Some in the know are suggesting that time could be coming.

Is the median home price in the United States declining?

There are plenty of blog posts out there meticulously detailing and methodically spewing relatively meaningless-to-the-average-person statistics like: “The median home price in Austin is up 14.2% year over year but down 1.8% from last month.”, if that’s your thing. However, the gist of September’s Realtor.com housing report is the median home price is still $380,000.

As every report shows, some markets are doing better than others, and some are trending better than others. The big picture is home prices continue to rise. There are fewer homes for sale, driving prices up, and growth rates continue to be near double digits.

Slowing growth rates can be interpreted as cooling, but growth is growth. And growing home values does not make finding a deal easier.

New listings are down compared to the previous two years. Simple supply and demand explains the difficulty in finding the right home for the right price. Until more sellers enter the market, bidding wars will make it difficult for typical families to compete for homes.

What do rising mortgage rates mean for home prices?

Mortgage rates have come off their lows a bit over the last few weeks. That sounds ominous, but the reality is mortgage rates are historically low. Theoretically, when mortgage rates rise, buying power decreases, and therefore home values taper off. However, when rates are this low, few homebuyers will be deterred if their mortgage rate is 3% instead of 2.75%.

Several factors go into what determines mortgage rates. Coming off a global pandemic (hopefully), the economy is fragile. The chances of a significant rising interest rate environment is unlikely, especially at a level that would impact mortgage borrowers in a way that would affect home prices.

So is the housing market cooling down or not?

There may be short term indicators that growth is slowing. However, significant weather events and continued fallout from the COVID-19 pandemic might explain slow downs in certain markets. Every real estate market is different, but the general takeaway is you won’t need a sweater anytime soon.

What's My Payment? (WMP) is not a mortgage lender, nor are we affiliated with any government agency, including FHA, VA, USDA, FANNIE MAE, or FREDDIE MAC. We do not originate mortgage loans.

WMP provides information and mortgage payment calculations for a variety of loan types, both government (FHA, VA, USDA, etc.) and in general. While every effort is made to ensure the information we provide is accurate, all calculations and information provided throughout this website are for demonstration purposes only.

Equal Housing Opportunity
Background Image