Self-Directed IRA

Home Prices See a Startling Drop – And What It Means

Look out below. Anyone paying attention to the markets—Self-Directed IRA holder or no—has to be startled by the recent news. As CNBC notes, home prices declined 0.55% from June to July of 2022. While this might not sound like much, it marks the first monthly decline in almost three years—and it represents the largest decline in a single month since January of 2011. In other words, with the economy in troublesome waters already with inflation, home prices dropped at their biggest mark in over a decade. That could spell some turbulence in the housing market. Here’s what to make of it.

Reacting to the Home Prices News

For starters, it’s important to put housing prices in context. While a 0.77% decline might not sound like much, especially when the stock market can easily drop that much in a day without investors batting an eye, it’s a bigger deal when this happens in the housing market. Housing prices are typically slower to react to the economic news. And given where we are in terms of rampant inflation, a price drop like this is especially significant with the contextual backdrop. As food prices as skyrocketing, home prices are down—which could spell risk for some homeowners who count on home prices going up.

Even more interesting, housing affordability—a different marker that weighs peoples’ ability to buy homes against their current economic status—is extremely low. “Now, housing affordability is at its lowest level in 30 years,” reported CNBC. “It requires 32.7% of the median household income to purchase the average home using a 20% down payment on a 30-year mortgage, according to Black Knight.”

In other words, this small slip in housing prices is coming with an even more significant dip in housing affordability. “[Affordability level has dipped] about 13 percentage points more than it did entering the pandemic and significantly more than both the years before and after the Great Recession,” notes CNBC.

Why is this happening? The article quotes Andy Walden, vice president of enterprise research and strategy at Black Knight, as saying that there is a dynamic between interest rates, housing inventory, and home prices that is “untenable from an affordability perspective.”

What Does This Mean for Self-Directed IRAs?

As home prices decline, investors with Self-Directed IRAs should look for opportunities to invest in real estate. For example, if you have a Self-Directed IRA, you can purchase real estate directly through the retirement account by issuing a buy order to your Self-Directed IRA custodian. You can also use a Self-Directed IRA to invest in rental properties or distressed properties that have been foreclosed on or are otherwise available at a deep discount.

When the housing market is down, there are opportunities for investors to buy property at low prices. These properties can then be fixed up and sold later at higher prices. This gives investors more options when they want to diversify their investments when building a retirement portfolio through a Self-Directed IRA. As the housing market recovers and home prices rise (it’s safe to say that it will eventually happen in the long-term), investors with Self-Directed IRAs should watch for opportunities to invest in real estate. The declining prices have also made it easier for investors to find properties that they can afford and manage.

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Download our free guides or visit us online at