Many investors are wondering when housing prices will drop, but few can know for sure what the future holds.
Table of Contents
- How Has the US Housing Market Changed Lately?
- What Experts Forecast About US Housing Prices in 2022?
- Why Monitoring Housing Prices is Important
- 10 US Cities With the Lowest Median Property Prices
- How Mashvisor Can Help Investors Find Cheap Properties
The new decade started with a series of events some describe as catastrophic. It made many investors either fear or hope for a housing market fall. It didn’t happen, and the housing prices were actually rising in the last couple of years.
Now, the world is entering a new stage of the economic crisis, with energy prices rising and impacting the prices of basic commodities. Will it be a factor in US housing prices and will they drop later in 2022?
How Has the US Housing Market Changed Lately?
So are housing prices going down? Currently, the US market is not showing any signs of prices dropping any time soon. On the contrary, with supply slightly dwindling and demand increasing, the prices are rising and doing so at a record-breaking speed. According to CoreLogic research, prices are up 20% since last year.
Of course, that’s an average and if you check out the cheapest places to live in the US, you’ll find that prices haven’t changed that much. In some areas that aren’t doing as well, housing prices could have dropped. But, on average, the prices are rising. There are plenty of areas, mostly metropolitan ones, where prices are up more than 20% since last year.
Median Property Prices Across the US
The median price of a property is now at a record $405,000, a 26% increase since 2020. Given that in March 2020, the pandemic and lockdowns just started, one could expect the market to crash. It didn’t and instead rose in price even more, making investors millions and, at the same time, making it more difficult for new homeowners to enter the market.
Not only did the housing market bounce back up since the 2008 crash, but it’s also been in a steep upward movement since the 2020 pandemic. And that’s despite the fact the US entered a recession in 2020. How can it be possible? One of the explanations is mortgage rates are hitting a historical low.
Since most homebuyers are using credit, low interest rates equal a cheaper house. Mortgage interest rates hit the lowest point in January 2020, and the pandemic pushed the country and the world into a recession. It was the signal for plenty of people waiting for the perfect opportunity to become homeowners to act fast.
Now, with prices surging that high, more than 70% of home buyers believe it’s a bubble, according to Redfin. But will the real estate market crash any time soon? Let’s see what the experts have to say.
Related: What Is The Best Place To Buy Investment Property In 2022?
What Experts Forecast About US Housing Prices in 2022?
Will housing prices ever go down? Most likely, but they won’t fall dramatically. Even though experts differ in estimates of whether the housing market prices continue the meteoric rise, most experts concur that a significant market recession or even a crash is not in the picture. The reason behind that is that the situation is a lot different from back in 2008.
The housing crisis was caused mainly by predatory lending practices, resulting in many people getting a loan they could not afford and foreclosing on it. Low mortgage rates cause the current rise in prices. This time, people can afford the loans they’re receiving, so a market crash is quite improbable.
What is probably going to happen in the coming years is that the current growth trend will slow down significantly. It’s a prediction Daryl Fairweather, Redfin’s chief economist, shares with many of her colleagues. The reason behind the expectation of housing prices dropping is that interest rates are being increased.
Supply and Demand
The increased demand for housing was not caused by people possessing more disposable income as wages became rather stagnant, and the cost of living was slightly increasing due to inflation. It’s caused by easy access to cheap credit. As cheap credit slowly phases out, the increase in home prices is going to slow down, as well. However, we likely won’t see a downward trend, save for a small number of submarkets.
While some areas are overpriced, housing prices aren’t falling in the nearest future simply because of the law of supply and demand. The demand for housing is not going away. Even though millennials demonstrate a much lower rate of homeownership than the previous generations, only 18% expect to rent forever. Out of those, 70% do so despite their wishes; they simply don’t think they can afford a home.
On the supply side of things, there’s a major shortage. Rob Dietz, the National Association of Home Builders economist, says the US’s been underbuilding housing for decades. The difference between supply and demand was as high as 25% per NAHB estimates for 2018.
It’s mostly due to growing administrative costs, the price of lumber, and zoning laws that don’t allow for a higher density of housing. It creates a slight shortage of homes that won’t allow the market prices to drop significantly. They’ll just stop growing as much in the nearest future.
The Great Migration
Another trend that’s going to continue in the US is people moving to affordable cities. Since the pandemic made remote work more popular than ever before, and the Californian flight made the headlines, more homebuyers got on the bandwagon. A new purchasing pattern appeared with white-collar workers moving to cheaper cities to save money and stop renting. As long as the city is not in a recession and the homeowner is employed remotely, they’re good.
What it means for real estate investors is that smaller cities are now turning into a source of income from traditional rentals, not just an Airbnb business. Naturally, the net income is going to be a lot smaller than in LA or NYC, but the cash on cash return is going to be decent, factoring in that the initial investment is small.
Since prices for single-family units are pretty high, we may see a shift towards denser housing. It means if you’ve been looking for a duplex for sale, it’s the right time to close the deal!
In addition, the average rent is going to grow at least 7% according to Redfin. It makes 2022 and the succeeding years the decade of the small real estate investor.
Why Monitoring Housing Prices Is Important
For a homeowner who doesn’t want to move, home prices are irrelevant. Sure, it’s nice to know your property is appreciating, but the majority of Americans purchase homes to live and raise a family in, not to resell them.
But for a realtor or an investor, especially for those without millions to invest, pricing is very important. Making an investment precisely when the price is right can help optimize cash on cash return and make the investment worthwhile.
It’s also important to know how the prices move in local submarkets. Finding a hot submarket such as a small town that’s becoming popular to move into and purchasing a home there while it’s still relatively cheap can be a goldmine for a small investor.
Mashvisor is a tool that can be used to find hundreds of goldmines like that and negotiate deals right on the platform. Here are the top ten cities with the lowest property prices that offer a good return on investment based on Mashvisor estimates taken from an MLS database.
Related: How to Get Access to the MLS Database Without a License
10 US Cities With the Lowest Median Property Prices
Mashvisor’s analytical team presents estimates of median prices and much more based on data from open sources like Airbnb, Zillow, and MLS databases. Listed below are the top 10 US cities with the lowest median property prices, arranged in descendin
1. Kingman, KS
To the west of Kansas City, closer to the border with Oklahoma, there’s the tiny idyllic town of Kingman. It is next to a small river to the south, a hunting reserve and fishing spots further west, and a much larger city, Wichita, to the east. The median price in the town is lower than $100,000, and with 6% cash on cash return, Kingman is an excellent place to invest.
Key Statistics:
- Number of Listings for Sale: 6
- Median Property Price: $90,900
- Average Price per Square Foot: $71
- Days on Market: 27
- Number of Traditional Listings: 0
- Monthly Traditional Rental Income: $875
- Traditional Cash on Cash Return: 6.78%
- Traditional Cap Rate: 7.46%
- Price to Rent Ratio: 9
- Walk Score: 51
2. Garber, OK
Garber is situated in the middle of farmlands. There’s not much going on around it, apart from agriculture and several rivers good for fishing in the area. It may not look like much, but many farm employees are temp workers and will be interested in renting. It’s why traditional cash on cash return approaches 7% in Garber.
Key Statistics:
- Number of Listings for Sale: 5
- Median Property Price: $90,440
- Average Price per Square Foot: N/A
- Days on Market: 63
- Number of Traditional Listings: 0
- Monthly Traditional Rental Income: $852
- Traditional Cash on Cash Return: 6.99%
- Traditional Cap Rate: 7.71%
- Price to Rent Ratio: 9
- Walk Score: 7
3. Clinton, IN
Clinton is a small town in Vermillion country, Indiana, that is situated on a riverbank. With golf courses and parks near the town and Indianapolis being within an hour’s drive, Clinton is a great and affordable place to live. The low median price of $87,000 and an ROI of over 6% make it an attractive place to invest, too.
Key Statistics:
- Number of Listings for Sale: 7
- Median Property Price: $87,357
- Average Price per Square Foot: $70
- Days on Market: 61
- Number of Traditional Listings: 0
- Monthly Traditional Rental Income: $817
- Traditional Cash on Cash Return: 6.68%
- Traditional Cap Rate: 7.30%
- Price to Rent Ratio: 9
- Walk Score: 35
4. Beaver Falls, PA
Beaver falls is perfectly placed in terms of the ratio of city life and nature. It’s only 31 miles away from Pittsburgh. The town sits on a river with scenic walking routes along its banks. It is sure to attract tenants who are fine with a long drive to Pittsburgh, especially now that many jobs are partly remote. The median price of $83,000 and a 7% cash on cash return make it an excellent investment hotspot, as well.
Key Statistics:
- Number of Listings for Sale: 5
- Median Property Price: $83,940
- Average Price per Square Foot: $114
- Days on Market: 38
- Number of Traditional Listings: 14
- Monthly Traditional Rental Income: $840
- Traditional Cash on Cash Return: 7.01%
- Traditional Cap Rate: 7.86%
- Price to Rent Ratio: 8
- Walk Score: 75
5. New Ringgold, PA
New Ringgold is a small borough in Schuylkill County, PA. It’s far from large roads and borders only small rivers and hunting grounds in the nearest proximity. It’s only 37 miles from Allentown with all of its amenities, so getting to a large city for a weekend won’t be a problem. Property prices in town are low, only $83,000 for an average house.
Key Statistics:
- Number of Listings for Sale: 5
- Median Property Price: $83,900
- Average Price per Square Foot: N/A
- Days on Market: 102
- Number of Traditional Listings: 1
- Monthly Traditional Rental Income: $707
- Traditional Cash on Cash Return: 6.39%
- Traditional Cap Rate: 7.28%
- Price to Rent Ratio: 10
- Walk Score: 7
6. Cahokia, IL
Cahokia is a part of the St. Louis agglomeration on the Illinois side of the border. It’s a perfect place for an investor because it’s near a major city. It also attracts more people because of its cost of living. The median price of properties in the neighborhood is $77,000, which is a rare find for an investor.
Key Statistics:
- Number of Listings for Sale: 21
- Median Property Price: $77,314
- Average Price per Square Foot: $70
- Days on Market: 76
- Number of Traditional Listings: 5
- Monthly Traditional Rental Income: $735
- Traditional Cash on Cash Return: 4.96%
- Traditional Cap Rate: 5.51%
- Price to Rent Ratio: 9
- Walk Score: 40
7. Highland Park, MI
Highland Park is a true gem. A part of the Detroit agglomeration that’s close to an airport is sure to attract more people. Also, it is worth noting that Detroit is currently undergoing a revival. The housing prices are affordable, with a median of $75,000.
Key Statistics:
- Number of Listings for Sale: 6
- Median Property Price: $75,633
- Average Price per Square Foot: $54
- Days on Market: 128
- Number of Traditional Listings: 1
- Monthly Traditional Rental Income: $675
- Traditional Cash on Cash Return: 2.17%
- Traditional Cap Rate: 2.34%
- Price to Rent Ratio: 9
- Walk Score: 70
8. Big Beaver, PA
Big Beaver is a borough in Pennsylvania, some 25 miles away from Pittsburgh. Within the borough, there are two golf courses and a river that’s good for fishing. The low housing prices, averaging at around $67,000, and closeness to a large city make the place perfect for families seeking more affordable housing.
Key Statistics:
- Number of Listings for Sale: 5
- Median Property Price: $67,920
- Average Price per Square Foot: N/A
- Days on Market: 40
- Number of Traditional Listings: 0
- Monthly Traditional Rental Income: $590
- Traditional Cash on Cash Return: 5.80%
- Traditional Cap Rate: 6.55%
- Price to Rent Ratio: 10
- Walk Score: 0
9. Donora, PA
Donora is situated in a little curve of Monogahela river, 20 miles south of Pittsburgh. A bit far from a highway, it still provides a fast commute to the city while offering plenty of amazing nature around. One of the most notable points—there’s a skate park in town, which makes it a great place to raise a teen.
Key Statistics:
- Number of Listings for Sale: 5
- Median Property Price: $65,820
- Average Price per Square Foot: N/A
- Days on Market: 113
- Number of Traditional Listings: 3
- Monthly Traditional Rental Income: $671
- Traditional Cash on Cash Return: 6.63%
- Traditional Cap Rate: 7.47%
- Price to Rent Ratio: 8
- Walk Score: 52
10. North Appollo, PA
North Appollo is a borough close to Vandergrift, just on the other side of the Kiskiminetas River. It’s a large enough conglomeration with all the city amenities, but there’s also Pittsburgh some 30 miles westward. The borough offers one of the lowest prices in the US, as per Mashvisor data. It is another great place to live, which makes it an investment goldmine.
Key Statistics:
- Number of Listings for Sale: 5
- Median Property Price: $55,320
- Average Price per Square Foot: N/A
- Days on Market: 101
- Number of Traditional Listings: 0
- Monthly Traditional Rental Income: $581
- Traditional Cash on Cash Return: 5.67%
- Traditional Cap Rate: 6.48%
- Price to Rent Ratio: 8
- Walk Score: 35
How Mashvisor Can Help Investors Find Cheap Properties
Apart from accessing all the rental comps like the information you can see above, Mashvisor can help in many other ways. You can see a real estate heatmap of your chosen area with up to six filters being displayed on the map.
Another major feature Mashvisor offers is the Mashboard. With Mashboard, you can not only find a great property but also contact the seller and close the deal right on the platform.
Sounds promising? You can try Mashvisor for free for 7 days by clicking here! After the trial period, you can get a discount deal.