What Will It Take for Prices To Come Down?

What Will It Take for Prices To Come Down?

You might be wondering if home prices are about to crash, or perhaps even hoping for it to make homes more affordable. However, experts agree that a market crash isn’t on the horizon. 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 into why, on a national scale, home prices aren’t expected to drop anytime soon.

Prices Depend on Supply and Demand

The housing market operates on the basic principles of supply and demand. With the U.S. currently experiencing a housing shortage of several million homes, demand significantly outweighs supply. This imbalance is the primary reason why prices aren't expected to drop nationally. As David Childers, President of Keeping Current Matters (KCM), explains:

“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 been unable to construct enough homes to meet buyer demand. Following the 2008 housing crisis, the pace of homebuilding slowed dramatically and has only recently begun to rebound (see graph below):

Despite the growth in new construction over recent years, builders are still trying to catch up. According to AmericanProgress.org, they're not meeting today’s demand, let alone compensating for years of underbuilding.  

As long as this housing shortage persists, home prices are likely to remain stable or even increase in many areas.

What About Next Year?

Most experts predict that home prices will continue to rise next year, though at a slower and more balanced rate compared to recent years. This gradual growth reflects a healthier pace for the market overall.(see graph below):

While national trends offer valuable insights, home prices often depend heavily on local market conditions. In areas with more available inventory, price growth might slow or even dip slightly. Conversely, in regions with limited inventory, prices are likely to continue rising, which is the case in much of the country. Working with a local real estate expert is essential to understanding your market’s unique dynamics and how they impact your home-buying or selling journey. Let’s connect to discuss what’s happening in your area!

Bottom Line

If you're curious about what might cause home prices to drop, it all ties back to supply and demand. Since inventory remains tight in many markets, prices are expected to stay steady or even rise. Let’s connect to review what’s happening locally, so you can better understand our market and create a strategy that fits your goals!