Ask the Expert: We want to buy a house, but home prices are very high. Will prices come down in 2022?

No one can predict the future, but analysts continue to say home prices will stay high, and probably rise higher in 2022.

It’s a great time to sell a home, with prices up 20 percent nationally.

To understand this, consider the principle of supply and demand.

When people want to buy houses, that is called demand. When there are houses to sell, that is called supply. Prices are currently high because there are lots of people who want to buy houses and not enough houses for sale. So the supply of houses is low compared to demand.

What happens then is that buyers offer high prices for the houses that are available and sellers also ask for higher prices. If there were more houses for sale, prices could go down, especially at the current affordable interest rates on mortgages.

But many things affect this supply and demand tradeoff.

In the current market, one reason for low supply is that the home building industry has been unable to build as many homes as they could sell. They can’t get the building materials and they are short of workers. According to the U.S. Bureau of Labor Statistics, construction employment in October was still 201,000 jobs below its February 2020 level.

Laws can affect supply. Strict zoning laws and construction regulations make it difficult or impossible to build apartments and homes in some states and areas, so housing stock becomes tight.

On the other hand, prices that stay very high for a long time can, in fact, lower demand as buyers become discouraged. Then, more houses go unsold and sellers lower prices to entice buyers.

Meanwhile, rents can go up because it costs more to buy a rental property and there is more demand for a rental property if people can’t afford to buy houses.

All that said, here’s a good rule of thumb: The best time to buy a house is when you are ready.