When are home prices coming down?

“When are home prices coming down?”

This is the million-dollar question that continues to stir up the real estate industry.

During the pandemic boom when mortgage rates fell to historic lows, buyer competition went through the roof and home prices skyrocketed. Many people anticipated an impending market crash and stopped their home search in the hopes that home prices would plummet drastically. There was much speculation that we would soon be facing a repeat of the 2008 housing crisis.

In reality, homes prices dipped slightly following the end of the COVID years, but began to climb back up in the last few months, with no signs of a market crash headed our way any time soon. In fact, with the extremely low inventory we are seeing today, home prices in some areas are higher now than they were at the peak of the pandemic. 

It is great news that we’re not expecting a market crash, but the current high prices have pushed many buyers to the sidelines. Coupled with the rising mortgage rates, buyers are being priced out of the market, feeling like they have no choice but to give up on their home search. 

Which brings us back to the question - “when are home prices coming down?”

Unfortunately, experts don’t see prices dropping significantly in the near future. While it’s hard to determine exactly what the remainder of this year will bring, it doesn’t seem like home prices will be coming down to the levels buyers are waiting for. 

Bankrate’s chief financial analyst, Greg McBride predicts, “Prices will remain fairly steady - and in a lot of markets, that’s a price that is 40 percent or more higher than pre-pandemic.”

This is mainly due to the severe lack of homes on the market. The majority of homeowners are unwilling to give up their current 3% mortgage and take on a new home loan at today’s 7% interest rate. As a result, the number of active listings per month in our local area has decreased by nearly 49% since September 2022. Buyers are competing over the small pool of homes for sale, once again driving up the competition, and along with it, the home prices.

But this isn’t to say that there’s no hope for buyers. 

Robert Johnson, a professor of finance at Creighton University’s Heider College of Business, says, “Many reluctant sellers - those waiting for the market to turn around - will likely capitulate [this year], adding to more housing supply.”

In addition, a rise in new construction homes may help with the housing shortage. A recent article by the National Association of Home Builders reported, “Builder confidence in the market for newly built single-family homes in July posted a one-point gain to 56… This is the seventh straight month that builder confidence has increased and marks the highest level since June [2022].” 

The U.S. Census Bureau and the U.S. Department of Housing and Urban Development jointly announced that the number of privately-owned housing completions in June increased by 5.5% since the same time last year. Add to that a slow down in building material price growth, and we may be seeing more new builds hitting the market soon. This should help to ease some of the heavy competition around pre-existing homes.

It is true that it’s a tough market out there for buyers right now, but that doesn’t mean you have to give up on your dream of homeownership. There are many different solutions available for you! 

For instance, the Dream For All program is slated to make a return later this year. It’s a fantastic first-time homebuyer program that offers a 20% loan towards your down payment and/or closing costs at no interest. Our trusted lender partners also have various loan products, including the Down Payment Assistance program which provides a true grant of 2-3% that never has to be repaid. These can help offset the higher home prices, and help you buy your home at an affordable payment.

There are many different options out there, and it’s important to find the one that works best for you. Partner with a trusted real estate team who understands your local market and can successfully guide you through your home-buying journey from start to finish.

While it’s critical to understand what’s going on the real estate market, it’s just as important to find solutions that work for your unique situation. Connect with our team below. We’re here to answer any questions or concerns you may have, and help find the best solutions for you!