After two years of tremendous price appreciation, home prices are on their way back down. How much lower will prices go?
In short: Prices are likely to continue their descent, but not as much as we saw in the housing bust of 2008-9. One reason is that the drop in those years was mostly a push from sellers. Foreclosures and short sales motivated sellers willing to take a loss on their homes.
Plus, the inventory of homes available for sale at that time was four times higher than it is now. For those reasons, a price drop below where they were in 2019 is unlikely.
Falling home costs are just some of the things that homebuyers are watching. Mortgage rates have more than doubled since the start of 2022, changing homebuyer calculations considerably.
The monthly principal + interest mortgage payment on the median-priced home has risen by $930 from a year ago --a 73% increase, according to Black Knight.
Relief is in sight for some buyers. Economists at Goldman Sachs predict home prices to dip by around 5% to 10%.
In fact, a recent forecast predicts that national median single-family home prices will decline by 5.5% year-over-year by the end of 2023.
They estimate the median price for an existing single-family home to be $385,000 this year and anticipate the price will fall to $364,000, a decline of 5.5%. However, they also predict prices will rebound in 2024, rising 3.3% to 376,000 by the end of 2024.
Ultimately, how much prices decline will depend on where you live. Unlike the near-unilateral price increase that the nation experienced during the pandemic, the cooling off will likely be more regional.
The most significant drops will be in places with the largest gains, such as in the West and Sunbelt. We already can see signs of that with Zillow reporting Phoenix, down 2.3%; Las Vegas, down 1.9% and Austin, down nearly 1%.