Data from the National Association of Realtors (NAR) reveals a cooling trend in existing home sales, with the average home on the market for 44 days in May 2024. This is a significant shift from the rapid turnover seen during the housing boom of 2021 and 2022. If you’re wondering when home prices might decrease to make homeownership more accessible, you may need to be patient.
Experts predict that 2024 will not be the year for a significant drop in housing prices to pre-pandemic levels. If you’re determined to navigate today’s real estate market, here’s what to expect and how to proceed.
Are house prices decreasing?
In short, no. Home prices continue to climb in 2024 compared to last year. As of May, Realtor.com reported a 0.3% national increase from 2023, bringing the median home price to $442,500. NAR data for April showed a 5.7% increase, with a median price of $407,600.
According to Bob Smith, head of real estate at Advisor Credit Exchange, several factors are sustaining high home values. “The shortage of existing homes and insufficient new construction to meet demand keeps prices elevated,” Smith explained. The reluctance of homeowners to sell properties with low pandemic-era mortgage rates, while current rates hover around 7%, further constrains inventory.
Affordability challenges persist as well. Rising prices and high mortgage rates deter buyers from selling their homes for new ones, compounding supply issues and leaving both buyers and sellers in a difficult position.
When might house prices decrease?
While the outlook for 2024 is not favorable for a price drop, housing prices will decline when economic conditions align—mainly through lower interest rates and increased housing supply.
Interest Rates
Lowering interest rates will require patience. The Federal Reserve has signaled only one rate cut for this year, down from the expected three. Whether this cut will occur in September or December remains uncertain. However, 2025 looks more promising, with the Fed anticipating four rate cuts compared to the previously expected three. Given the lack of rate reductions this year, skepticism about these forecasts is understandable.
Boosting housing supply
Increasing supply hinges on current homeowners and builders. Homeowners might sell as they upsize, downsize, or relocate, particularly if lower interest rates make selling more appealing. Builders, cautious from past inventory surpluses, are hesitant to overbuild in a high-rate environment. Lower rates could stimulate new construction and potentially ease prices.
Tips for eager buyers If you’re keen to buy despite high prices, consider these strategies:
- Buy now, refinance later: Enter the market with a home within your budget and plan to refinance when rates drop. This approach allows you to start building equity now.
- Start with a smaller property: Consider purchasing a condo or a tiny house, both of which can be more affordable and help you build equity for future upsizing.
- Explore modular homes: Modular homes, assembled on-site from pre-made sections, can be 10% to 20% cheaper than traditional homes and offer a cost-effective way to achieve homeownership.
