As you think about buying a home, you may be wondering: Will home prices ever go down? It’s a valid question, especially with the constant media reports about rising prices. While it’s easy to get discouraged by the national trends, it’s important to remember that real estate is heavily influenced by location. What’s happening in your area is often more relevant than national averages.
Are Home Prices Going Down?
Across much of the country, it’s still a seller’s market, meaning demand continues to outpace supply. National price indices show that home prices are generally rising. However, the picture may vary significantly depending on where you’re looking to buy. Understanding local market trends can give you a clearer idea of what to expect in your area.
National Home Price Trends
Two key indices help track home prices across the nation:
- S&P CoreLogic Case-Shiller Index: This index tracks home purchase transactions in major markets across the U.S. As of the most recent data from June 2024, home prices have increased by 5.42% year-over-year.
- FHFA House Price Index: This index focuses on transactions backed by conventional loans and also shows a 5.7% increase in home prices since Q2 2023. However, on a more localized level, some areas, such as New Orleans, LA and Austin, TX, have experienced slight price decreases.
These figures point to overall price growth, but they also highlight some regional differences where prices may be stabilizing or declining.
Existing Home Prices vs. New Home Prices
Many buyers gravitate toward existing homes, thinking they’re more affordable compared to newly built homes. This is often the case, but it depends on the local inventory. In some areas, where builders are focusing on starter homes and there’s limited existing inventory, new construction may actually be a better deal.
For existing home prices, the National Association of REALTORS® (NAR) reported a median price of $422,600 in July 2024, which is a 4.2% increase from the previous year. While sales of existing homes are slowing slightly, buyers are seeing more options as inventory levels rise and interest rates remain favorable.
For new home prices, the U.S. Census Bureau and Department of Housing and Urban Development reported a median sale price of $429,800 for July 2024, a slight 1.38% decrease from the year prior. This points to a possible shift toward more affordable new home options as inventory and demand shift.
What Do Housing Experts Expect?
While predicting the future of home prices is never an exact science, experts do provide some insights based on current data and trends:
- Fannie Mae expects home prices to increase by 3% in 2025, albeit at a slower rate than recent years. This is due to an anticipated rise in inventory and sales.
- Freddie Mac predicts a more modest increase of 0.6% in 2025, citing low inventory and continued upward pressure on prices due to limited home construction.
Why Are Home Prices High?
Several factors are contributing to the current high home prices:
- Low Housing Inventory: The supply of homes remains below pre-pandemic levels, with fewer homes available for buyers. This limited supply is driving up prices due to high demand.
- Seller’s Market: With fewer homes for sale, buyers face competition, which leads to higher prices. As of mid-2024, the U.S. remains in a seller’s market, where sellers hold the upper hand.
- Millennials and Gen Z Buyers: Millennials are now the largest demographic of homebuyers, making up 38% of all buyers in 2024, with many of them purchasing for the first time. This influx of younger buyers is further fueling demand.
What Could Cause Home Prices to Fall?
While home prices have generally risen over time, there are a few potential scenarios that could lead to a decline:
- High Mortgage Interest Rates: If mortgage rates rise significantly, some buyers may be priced out of the market, which could reduce demand and, in turn, lower prices.
- Oversupply of Homes: If builders ramp up production and there is an oversupply of homes, sellers may need to lower prices to attract buyers.
- Economic Recession: A downturn in the economy, leading to job losses or lower consumer confidence, could decrease demand for homes, potentially causing prices to fall.
How to Prepare for Buying a Home
Even if you’re waiting for prices to drop, there are steps you can take to prepare for homeownership:
- Get Preapproved for a Mortgage: A mortgage preapproval shows you exactly how much you can afford to borrow, which can make your offer more attractive to sellers.
- Save for a Down Payment: Plan to save for a down payment of 3-20% of the home’s purchase price, depending on your loan type. For government-backed loans like VA or USDA, no down payment may be required.
- Improve Your Credit Score: A higher credit score can help you secure a better interest rate, potentially saving you thousands over the life of your loan.
The Bottom Line: Focus on What You Can Control
While national trends indicate rising home prices, the best time to buy a home is when you’re ready—not necessarily when prices dip. In some areas, prices are already showing signs of leveling off or declining. AvantiWay Financial is here to help you navigate the process of buying a home, regardless of the market conditions.
Whether you’re buying now or waiting for the right moment, it’s essential to stay informed about your local market, improve your financial standing, and work with trusted experts who can guide you through the process. Reach out to us at AvantiWay Financial to explore your mortgage options and take the next step toward homeownership.
