Real Estate Trends: Are Home Prices Finally Cooling Off?
Are you wondering if home prices will ever go down? It’s a common question, especially with all the buzz in the media about rising costs. While it can feel discouraging to see national figures climbing, remember that real estate is all about location. What’s happening nationally may not reflect what's going on in your neighborhood.
Are Home Prices Dropping?
In many parts of the country, it’s still very much a seller’s market, meaning prices are continuing to rise overall. But that’s not the full story. While national trends show prices are up, things can vary significantly based on where you live. Let’s break it down.
S&P CoreLogic Case-Shiller Index
This index tracks home purchases across major U.S. markets. Although the data has a two-month delay, it’s still a good indicator of overall trends.
A report released September 24, 2024, found that prices were up 5% as of July compared to the previous year.
FHFA House Price Index
The Federal Housing Finance Agency’s index focuses on homes financed by conventional loans. Nationally, home prices rose 5.7% from the second quarter of 2023.
However, prices have started to drop in some places. Seventeen metro areas across the US have reported declines in the last quarter.
Existing Home Prices
Many buyers gravitate toward existing homes because they’re often more affordable than new construction. But that’s not always the case. In some areas, particularly where there’s low inventory of existing homes, new construction might be a better deal.
According to the National Association of REALTORS® (NAR), the median sale price for existing homes in July 2024 was $422,600, up 4.2% from the previous year. The number of home sales, however, has dipped by 2.5%, with about 3.95 million sales reported this July compared to 4.3 million the previous year.
NAR’s chief economist noted that while sales have slowed, buyers are seeing more options, and affordability is improving thanks to lower interest rates.
New Home Prices
If you’re looking at new construction, the Department of Housing and Urban Development and Census Bureau report that the median sale price in July was $429,800, a slight 1.38% decrease from last year.
What GSEs Are Saying
So, what can we expect in the future? While no one can predict the market with certainty, housing experts have made some educated guesses:
- Fannie Mae anticipates that while home prices will keep rising, it’ll be at a slower pace—about 3% in 2025. They also expect an 8.5% increase in home sales.
- Freddie Mac predicts home prices will increase by 0.6% in 2025, mainly due to low housing inventory. They also project total home sales will stay below 6 million next year.
The housing market may feel tough, but understanding what’s happening locally and getting the right loan for your needs is key to finding the best opportunities in your area.