Home Price Gains Hit 18.8% in November as Buyers Await a Cooldown

New data reveals inflated home prices continue to be a problem. When can you expect some relief?

If you've been trying to buy a home for the past several months, you may have been held up by one key factor -- prices. Home prices have been up for well over a year, due in part to limited inventory and also due to low mortgage rates.

At this point, mortgage rates are starting to inch away from the record lows we saw earlier on in the pandemic and reach more moderate levels. But home prices aren't coming down.

In November, home prices rose 18.8% from the previous year, according to the S&P CoreLogic Case-Shiller National Home Price Index. And while that was a slower rate than what we saw in October, when home prices recorded a 19% annual gain, it's still a sign homes are just plain unaffordable for a large number of buyers today.

When will home prices start dropping?

The U.S. housing market is currently starved for inventory. And any time you have a situation where there's not enough of a given product or commodity to go around, its price has the potential to rise. That explains why home prices are so inflated right now. While that may be a good thing for sellers, it's leaving buyers out in the cold.

First-time buyers may be having an exceptionally difficult time breaking into the market. The reason? While housing inventory is down across the board, there's a notable shortage of starter homes available today. And the starter homes that are available are being listed for much higher prices than usual, making it tough on buyers with a limited budget.

For home prices to really start dropping significantly, we need an influx of inventory to hit the market. But whether that will happen in 2022 is anyone's guess.

Sellers have been hesitant to list their homes due to general economic and pandemic-related uncertainty. Right now, we're not out of the woods in either regard.

While unemployment has stayed relatively low in January, as measured by weekly claims filed, we could see an uptick in jobless claims if the omicron surge forces businesses to shutter and lay off staff. Also, while the stock market's performance is by no means indicative of how the broad economy is functioning, it's hard to ignore the fact stocks have been swinging wildly over the past week. All of this could be swaying would-be sellers to rethink their plans.

There's also the pandemic itself to consider. For some people, making a big change during a health crisis is far from ideal. If case numbers don't drop drastically, listings may not rise dramatically.

Buyers will need to be patient

Although November's home price gains fell slightly short of October's, they were high nonetheless. There's a good chance December's gains will be notably high as well once that data becomes available.

Those looking to buy a home may need to sit back, be patient, and wait for more real estate inventory to arrive. That's really what it's going to take for home prices to come down, and until that happens, a large number of buyers may continue to be priced out of the market.