Are Home Prices Going To Come Down?
Today’s headlines and news stories about home prices are confusing and make it tough to know what’s really happening. Some say home prices are heading for a correction, but what do the facts say? Well, it helps to start by looking at what a correction means.
Here’s what Danielle Hale, Chief Economist at Realtor.com, says:
“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 the context of today’s housing market, it doesn’t mean home prices are going to fall dramatically. It only means prices, which have been increasing rapidly over the last couple years, are normalizing a bit. In other words, they’re now growing at a slower pace. Prices vary a lot by local market, but rest assured, a big drop off isn’t what’s happening at a national level.
In the past I've talked about Appreciation, vs Deprecation, vs Deceleration of appreciation. Our local market is definitely in the deceleration phase, where rapid appreciation has slowed a bit.
The Real Estate Market Is Normalizing
From 2020 to 2022, home prices skyrocketed. That rapid increase was due to high demand, low interest rates, and a shortage of homes for sale. But, that kind of aggressive growth couldn’t continue forever.
Today, price growth has started to slow down, which is a sign the market is beginning to normalize. The most recent data from Case-Shiller shows that after being basically flat for a couple of months last year, prices are going up at a national level – just not as quickly as before (see graph below):
The big takeaway? So far this year, there’s been a much healthier pace of price growth compared to the pandemic.
Of course, that’s what’s happening now, but you may be wondering what’s next for prices. Marco Santarelli, the Founder of Norada Real Estate Investments, says:
“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’s all about supply and demand. Increasing inventory plus limited buyer demand, due to relatively high mortgage rates, will continue to ease some of the upward pressure on prices. AKA, keep prices down.
But, once rates fall back into that 'sweet spot' - say around 6%, competition for buyers coming in off the sidelines will dramatically increase.
What This Means for You
Remember, interest rates can do three things:
Go up.
Go down.
Stay the same.
If you’re thinking about buying a home, slowing price growth is welcome news. Lock in now so that when rates do fall, you just have to refinance to capture the lower rate, and not compete with the onslaught of new buyers entering the market.
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. Our Market in here in the great Seattle Metro area is still seeing multiple offers on some properties. However, there are those properties that have been miss marketed, and sit on the market a bit which could be a real deal.
If you're making a move, reach out, and lets chat. Happy to brainstorm and come up with a solution that gets you a tangible and actionable plan that fits your unique situation.
Best,
Justin H Gazabat
Broker | PNW, Seattle, Ballard, East Side
Your Friendly Seattle Neighborhood Real Estate Professional.
www.JustinGazabat.com
PS: If anyone in your social or work circles considering a move, just send Me an intro text or email with their best contact info, make sure everyone is CC’d and I’ll take care of the rest! I promise to take great care of them, serve them well, make you look good, plus help them get great results.
