What Will It Take for Prices To Come Down?

What Will It Take for Prices To Come Down?

You might be questioning whether home prices are headed for a crash. Surprisingly, some individuals might even wish for this to happen to make homes more affordable. However, experts unanimously agree that such an outcome is unlikely – and here’s why.

There are more people who want to buy a home than there are homes available to purchase. That’s what drives prices up.

Let’s dive deeper and examine why home prices, on a national scale, aren’t expected to decline anytime soon.

Prices Depend on Supply and Demand

The housing market operates like any other: when demand surpasses supply, prices increase. Currently, the U.S. faces a housing deficit of several million homes, leading to more buyers than available properties. This imbalance is a primary reason why national home prices are unlikely to decline. As David Childers, President of Keeping Current Matters (KCM), notes: 

“The main driving force on pricing is the limited amount of inventory in most markets across the country. That issue is not going to be solved overnight or in the next twelve months.”

How Did We Get Here?

For more than 15 years, homebuilders have not constructed enough homes to meet the growing demand from buyers. Following the 2008 housing crisis, the pace of homebuilding slowed dramatically, and it has only recently begun to recover (see graph below):

Even though new construction has been increasing in recent years, builders are still trying to catch up. According to AmericanProgress.org, they’re not keeping pace with current demand, let alone addressing the years of underbuilding. 

As long as the housing shortage continues, home prices are likely to remain stable or even rise in many areas.

What About Next Year?

The majority of experts believe that prices will continue to rise next year, though at a slower and more sustainable pace. (see graph below):

It's crucial to recognize that home prices can vary significantly by market. National trends may not perfectly mirror what's occurring in your local area. If there's more inventory in your market, price growth could slow or even decrease slightly. Conversely, in regions where inventory is still limited, prices are likely to continue rising — a trend that holds across much of the country. This underscores the importance of partnering with a local real estate expert who is well-versed in your specific market and can provide insights into the dynamics at play in your area.

Bottom Line

If you're curious about what might cause home prices to drop, it all boils down to supply and demand. Since inventory remains scarce in most markets, prices are expected to either stay steady or increase.

To get a clearer picture of home prices in our area, let’s connect. This will allow you to gain a better understanding of our local market and develop a strategy that suits your needs.