Data from the National Association of Realtors (NAR) shows that existing home sales may be cooling — the typical home for sale spent 44 days on the market in May 2024. That’s a far cry from the just-listed-to-pending trend seen during the housing market’s hot streak from 2021 to 2022. So you might be wondering: If the housing market is cooling, when will housing prices drop so I can get my slice of the homeownership pie?
Experts say that 2024 will likely not be the year that housing prices start their descent to pre-pandemic levels. But if you’re determined to buy or sell, here’s what you need to know about today’s residential real estate market and your options for moving forward.
In this article:
Are house prices going down?
The short answer? No. House prices are still on the rise in 2024 when compared to 2023 figures, no matter how you slice the numbers. As of May this year, Realtor.com reported that house prices were up 0.3% nationally from 2023 numbers, putting the median sale price at $442,500. April data from the NAR showed a more significant price increase of 5.7% compared to 2023, with the 2024 median home sale price at $407,600.
Bob Smith, head of real estate at Advisor Credit Exchange, said via email that multiple factors are driving rising home values.
“Home prices remain at heightened levels due to a shortage of existing homes for sale and new home construction failing to fill the demand gap,” said Smith. Some reasons for this housing inventory shortage include homeowners reluctant to give up the ultra-low-rate mortgages they secured early on in the pandemic — especially with current mortgage interest rates hovering in the 7% range.
also plays a role. Even if buyers are willing to give up those low mortgage rates to buy a new home, rising home prices and high mortgage rates can make that decision costly. So consumers are left with the current market: one where supply remains tight and mortgage rates high, leaving buyers and sellers with more questions than answers.
When will house prices go down?
While it’s a bummer of an answer, experts say it’s unlikely consumers will see house prices drop meaningfully during 2024. Home prices will drop when a mixture of economic factors favorably collide — primarily lower interest rates and increased housing supply.
The interest rate waiting game
Those looking for lower interest rates will need to play a game of patience, as the just signaled it would only pursue instead of the anticipated three. Whether the aforementioned cut comes in September or December remains to be seen.
The outlook for 2025 looks a bit rosier, however, with the Fed anticipating four rate cuts versus the previously expected three. But it’s understandable if you’re having trust issues with interest rates, given that forecasts for 2024 were optimistic but the remains unmoved since July of last year.
Amping up supply
Increasing the housing supply will involve two factors: current homeowners and home builders. These two demographics drive housing supply from different angles.
For current homeowners, leaving a 3% mortgage for one in the 7% range is a tough pill to swallow. While Smith said supply will naturally increase as homeowners upsize, downsize, or move to another metro, lower interest rates will increase housing affordability across the board. As rates come down, sellers may feel inspired to sell while they can still capture gains from recent price hikes and score a lower rate on a new mortgage.
Builders also contribute to the housing supply. At present, new home starts are down slightly (0.6%) compared to 2023, said Sameer Samana, senior global market strategist with the Wells Fargo Investment Institute, via email. Builders had significant inventory on hand when the pandemic hit and don’t want to repeat that error, especially with many prospective home buyers reluctant to buy due to interest rates.
So, if you think interest rates may play a significant role in supply, you’re right. Though rates aren’t the only factor driving housing costs, they are a bit like the key that could help increase supply and unlock a downward price trend.
Strategies for eager buyers
Despite the lack of hope for falling home values for the rest of 2024, those eager to buy aren’t left out in the cold. Here are a few strategies to consider if you see homeownership in your not-so-distant future.
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Buy with an eye on refinancing. Samana said buyers could get into the market today with a home in their price range and look to refinance down the line. While you might get less house for your budget, you can start building equity. When rates come down, you can to a lower rate or even a altogether.
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Start small. While it might not be your dream home, you could find housing happiness in today’s market by purchasing a or buying a lot and putting a on it. Both home types can cost considerably less than a single-family home and help you build equity that translates to cash when you’re ready to upsize.
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Go modular. No, these aren’t mobile homes. are those that look just like a single-family home when constructed. The only difference is that they’re built in modules off-site and assembled when they get to your lot. They can also cost 10% to 20% less than a traditionally built home.
Housing prices FAQs
Will 2024 be a good time to buy a house?
2024 may be a good time to buy a house if you intend to refinance your mortgage down the line. This option will likely be a better fit for those who intend to be in their home for at least three to five years, as interest rate cuts aren’t happening as quickly as the Fed predicted and may take longer than the end of 2024 to come to fruition.
Is it a good time to buy a house?
if you find one you can afford and feel emotionally and financially ready to take on the responsibility of homeownership. The best time to buy a house is when you have solid finances, a steady employment track record, and a credit history showing you responsibly handle your debts.
Will U.S. housing prices ever drop?
U.S. housing prices could drop when home supply and buyer demand reach a tipping point. Typically, house prices will fall when supply exceeds demand, and sellers need to lower prices to entice buyers. As of Q2 2024, home supply is increasing, but not to the point where the number of homes for sale outnumber those in the market to buy.