Houses are cheaper, yet hopeful first home buyers face myriad new dream-diminishing issues.

House prices fell 5.6% over the past three months, Real Estate Institute (REINZ) figures out this week showed.

In Auckland, they’re down 6.6%, in Wellington 11.3%, Christchurch 4.9%, Dunedin 6.1%, Tauranga 4.1%. Only Queenstown bucked the pattern.

Year-on-year, the national median price climbed 2.4% to $840,000, with Auckland the only region where prices fell since May 2021, by 2.2%.

So that’s all gold for first home buyers, right?

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Not so much, real estate, housing specialists and economists say.

There’s more to being able to afford a house than the asking price. Inflation is eating away incomes, and KiwiSaver stock exchange-related falls are eroding deposits.

And then there’s the approach of the mortgage lenders, says Brad Olsen​, principal economist and director at Infometrics.

“The challenge for housing at present is that increases in interest rates mean people are unable to borrow as much from the bank,” Olsen says.

One effect is buyers cannot put the same high bids on houses and, to make a deal, sellers must accept a lower price, or consider waiting out the falls in the market, he says.

“A lot of people are struggling with what are still very high house prices. First home buyers are unable to get the cheap lending previously available, meaning that although it’s a buyer’s market, that market is almost a third smaller than it was last year.

“House prices have been insanely high, and need to come down, and a reset was always realistically on the cards. Your savings ability is being constantly and frantically eroded by inflation, meaning that pulling together a deposit is hard, too.”

Of concern to buyers is taking on a mortgage on a still-expensive asset at a time when borrowing costs are going up and up, Olsen says.

That raises the worry that making repayments will become more difficult.

Secondly, he says, first home buyers will be concerned about paying too much when house prices are softening for the first time in a while.

While real estate agents predict a slowing in the market, and a levelling off of prices, Capital Australia & New Zealand economist Ben Udy has predicted substantial falls.

The independent agency has revised its forecast for the peak to trough decline in prices from 10% to 20%, compared to a 15% fall from a peak in Australia, Udy told interest.co.nz in May.

REINZ boss, chief Jen Baird​, this week said a dip in prices from April to May was typical, but in 2022 it had been greater than expected.

With further interest rate increases expected, global economic uncertainty, supply chain disruption and the conflict in Ukraine, market activity may settle this winter “at its new, slightly slower, pace”.

Auckland real estate agent Leila MacDonald says as well as there being fewer homes on the market, sellers were tending to hold off.

“Prices are not going to go down any more than they are now. If [buyers] are waiting for them to go down more, they are going to be sorry,” she says.

“It’s the time of the year too – it’s winter now. Most people want to wait until the spring comes up to put their houses on the market.”

Lower prices over the past three months likely reflect that a higher proportion of those who sold in the past three months had to, a circumstance which can lead to lower prices, McDonald says.

Fretting over house prices was more likely among vendors who need to sell. “They might just say, let’s get on with it, and sell it,” the Barfoot & Thompson agent says.

“Some people if they don’t get their price – what they are wanting – they won’t sell. They sit and wait. So the prices go up and up and up, then they level. People who think the market is going to go down more and wait – they are going to be left behind.”

Even if a first home buyer can save a deposit, and can find a house, there are other flies in their ointment.

Inflation is at a 30-year high, up 6.9% in the March 2022 quarter compared with the March 2021 quarter, the largest movement since the June 1990 quarter.

Groceries and petrol are more expensive, which leads to tighter household budgets and less income available to pay the mortgage.

Wellington-based housing specialist Ian Mitchell​ says that while housing prices are difficult to predict, 2022 could still be the easiest time to get into the market.

“With each year that passes, it seems it’s harder for people to become owner-occupiers, but at the same time, people are still achieving it,” he says.

“I would pick overall that, unless there’s some significant changes, it will become harder for people to become owner-occupiers, if the same sort of licences between house prices and incomes remain.

“The other issue which is hard to determine exactly where it’s heading, is how far interest rates will go, and how long they’ll stay up, because that will have a significant impact on housing affordability and people’s ability to buy as well.”

Wellington real estate sales consultant James Copeland​ of Tommy’s says the market is problematic for sellers as well. Sell, or don’t sell, that is the question.

“No one goes on the market for fun,” he says. “When you put your property up for sale you want to see a result. As good a price as possible, in a reasonable period of time.”

He offers a route for intended sellers, akin to the Kenny Rogers advice in the song The Gambler: “Know when to walk away”.

“As a seller, it’s important to keep reflecting on what price you are expecting to understand if it’s still in line with market conditions,” he says.

“If you aren’t getting any action on your property after weeks on the market, it’s highly likely your expectation or asking price is too high.

“You can only deal with what the market is serving up right now. Stewing over the price you would have got if you sold six months ago is a waste of time. You aren’t on the market six months ago, you are on the market now.”

Sellers need to ask themselves whether the market value of their property allowed them to move ahead with their plans.

If so, make the adjustments to your price expectation and get moving, he advises.

Consider what your home would have been worth 18 months ago, he says.

“For most properties, that figure might be similar to what you could sell for today. So don’t wish for that peak market price, because if you had sold then you might have ended up paying top dollar for your next home (which could now be worth significantly less).

“Focus on what’s possible now, and whether that allows you to achieve your goals. If so, get your asking price in line with the current market and get moving.”

Olsen says the speed of change in the housing market, and the economy, had been surprising, not only for first home buyers.

“In fairness, the speed of change in the housing market has surprised, but then so has the speed and height of inflation, and the pace of interest rate increases needed to bring inflation under control. We’ve still got a way to go yet,” he says.

Treasury forecasts showed that by the lowest point for house prices on their Budget 2022 forecasts (late 2023), house prices will still be 32% above pre-pandemic levels.

Over the same period of time, inflation will have increased 17% and wages 18%, Olsen says.

Overall that mix meant it was “one step forward, one step back for a potential buyer, when the house takes a few steps further ahead”.