Are Home Prices Going to Come Down?
Today’s headlines and news stories about home prices can be overwhelming and often leave us wondering what’s really going on. Some sources say home prices are headed for a correction, but let’s take a step back and look at the facts. What exactly does a correction mean?
Danielle Hale, Chief Economist at Realtor.com, explains:
“In stock market terms, a correction is generally referred to as a 10 to 20% drop in prices . . . We don’t have the same established definitions in the housing market.”
In today’s housing market, a correction doesn’t necessarily mean prices will drop drastically. It just means prices, which have been rising sharply over the past few years, are starting to stabilize. In other words, they’re still going up, just not at the same breakneck speed. Prices will vary depending on your local market, but rest assured, we’re not looking at a nationwide plunge.
The Real Estate Market is Normalizing
Between 2020 and 2022, home prices shot up due to a perfect storm of high demand, rock-bottom interest rates, and a lack of homes for sale. But that kind of rapid growth was never going to last forever.
Now, the pace of price growth is slowing down, which signals that the market is normalizing. According to the most recent data from Case-Shiller, after staying flat for a few months last year, prices are rising again nationally—just not as quickly as before (see graph below):
So far this year, price growth has been healthier and more sustainable compared to the pandemic frenzy.
Of course, that’s what’s happening now, but what’s the outlook for the future? Marco Santarelli, Founder of Norada Real Estate Investments, weighs in:
“Expert forecasts lean towards a moderation in home price growth over the next five years. This translates to a slower and more sustainable pace of appreciation compared to the breakneck speed witnessed in recent years, rather than a freefall in prices.”
It all comes down to supply and demand. With more homes on the market and buyer demand cooling due to higher mortgage rates, the pressure on prices will continue to ease.
What This Means For You
If you’re thinking about buying a home, slowing price growth is welcome news. Skyrocketing home prices during the pandemic left many would-be homebuyers feeling priced-out.
While it’s still a good thing to know the value of the home you buy will likely continue to go up once you own it, slowing price gains are making things feel more manageable. Odeta Kushi, Deputy Chief Economist at First American, says:
“While housing affordability is low for potential first-time home buyers, slowing price appreciation and lower mortgage rates could help — so the dream of homeownership isn’t boarded up just yet.”
Bottom Line
At the national level, home prices are not going down. And most experts forecast they’ll continue growing moderately moving forward. But prices vary a lot by local market. That’s where a trusted real estate agent comes into play. If you have questions about what’s happening with prices in our area, reach out. Today’s headlines and news stories about home prices can be overwhelming and often leave us wondering what’s really going on. Some sources say home prices are headed for a correction, but let’s take a step back and look at the facts. What exactly does a correction mean?
Danielle Hale, Chief Economist at Realtor.com, explains: In today’s housing market, a correction doesn’t necessarily mean prices will drop drastically. It just means prices, which have been rising sharply over the past few years, are starting to stabilize. In other words, they’re still going up, just not at the same breakneck speed. Prices will vary depending on your local market, but rest assured, we’re not looking at a nationwide plunge.