When Will Home Prices Drop?
As the market continues to shift, more and more questions are being asked about how home prices will behave in the coming months. Will home prices continue to rise, or will they finally start to come down?
Rising Interest Rates:
What they mean for the market.
The cost of buying a home skyrocketed by more than 20% across the country in April of this year compared to last year. In some cities, that number was even higher, including:
- 34.8% in Tampa
- 32.4% in Phoenix
- 32.0% in Miami
The red-hot real estate market conditions were caused by a few factors, including the Covid-19 pandemic and ensuing Great Resignation, limited inventory, and historically low interest rates. Interest rates are now on their way back up — while this may not sound like the best news for home sellers or home buyers, it does mean the market has started to settle. In fact, rates are expected to rise to 5.7% by the end of the year. These increased costs are putting pressure on the housing market.
According to the Mortgage Bankers Association, there has already been a steep drop in mortgage applications. The drop was so significant that it pushed the market index down to its lowest level since 2000.
About 20% of home sellers dropped their prices during the month of May, but that doesn’t signify a serious shift in the market quite yet. Although the real estate market conditions are cooling, that doesn’t mean you can expect significant drops in home prices overnight. Most experts agree it will be at least 2023 before we see home prices drop.
Will the housing market crash?
There have been a lot of murmurings online and in social circles that we may be heading towards another 2006-style housing market crash. Most experts are not anticipating this kind of “bubble burst.”
Instead, Capital Economics predicts we’ll see a 5% drop in home price growth by the middle of next year. Then, they expect a gradual recovery to happen to 3% annual price growth by the end of 2024.
Should I wait?
Since there are no signs of a chaotic downturn in the housing market, if you are looking to buy a home, there's no need to wait.
If you are interested in selling your home, you should start the process sooner than later before prices start dropping as interest rates continue to rise. Remember, there’s a lot that goes into selling a home — getting it deep cleaned, de-cluttered, and staged, fixing broken appliances and cosmetic issues, coordinating price and marketing strategies with your real estate agent, taking professional photos and videos, listing the home, preparing for showings, preparing for an inspection and appraisal — and the list goes on.
If that list seems excessively long, it’s because the process can be arduous. So, there’s no need to wait. As the market slows down, it is taking longer for homes to sell. We’re not seeing people lined around the block, and multiple above-asking price cash offers roll in like we were a few months ago. If you’re looking to make the highest profit possible on your home, it's important to act soon before the real estate market conditions change and prices drop.
We Can Help
Whether you’re a home seller or a home buyer looking to navigate these turbulent real estate market conditions, our team of expert real estate professionals can help. We are skilled at negotiating home prices and working with clients during volatile times.