Market Daily

Market Daily

Housing prices drop again but leaves the question, how low will it go?

The housing market in the United States has gone through a series of ups and downs throughout the year.

Two years ago, the market experienced a comfortable price increase.

Since then, house prices have peaked but are now slowly falling.

Lower housing prices

Potential buyers and homeowners are wary of the movement in the market and wonder how much prices will drop.

Many experts believe it will decline further but estimate that it will not drop as low as it has in the past.

The S&P CoreLogic Case-Shiller Indices measure US home prices.

He reports that national house prices fell 27% between the high in 2006 and the low in 2012.

Jeff Tucker, a senior economist at Zillow, explained:

“It was different in 2008, 2009 because that drop in prices was because of a push from sellers.”

“Because of foreclosures and short sales, there were a lot of extremely motivated sellers who were willing to take a loss on their homes.”

Read also: September witnesses new home building retreat as mortgage rates intimidate buyers

Inventory and mortgage rates

Tucker also points out that the housing crash occurred when the inventory of homes for sale was four times higher.

Currently, inventory is still below pre-pandemic levels, increasing competition for housing.

It also keeps the prices strong.

Mortgage rates have more than doubled since early 2022.

As a result, the calculations for a home buyer have changed dramatically.

Black Knight is a mortgage company, and it found an interesting report.

There is a 73% increase as the monthly principal payment and interest on the average-priced home is up $930 from 2021.

How low will housing prices drop?

Black Knight reports that buying a home is now more expensive than in past decades due to factors such as:

  • Increasing mortgage rates
  • Elevated home prices
  • The slow-moving wage increase

Although the factors are frightening, some relief awaits buyers.

Goldman Sachs economists expect home prices to fall about 5-10% from the June peak.

Wells Fargo recently projected the national median single-family home price to drop 5.5% year-over-year by the end of 2023.

Economists expect the median home price to fall to $364,000, down 5.5% from this year.

They also predict that house prices will recover and rise in 2024.

Prices will increase by 3.3% to reach 376,000 by the end of 2024.

Wells Fargo researchers wrote a statement saying:

“The primary driver behind the housing market correction thus far has been sharply higher mortgage rates.”

“If our forecast for Fed rate cuts is realized, mortgage rates are likely to fall slightly just as cooling inflation pressures boost real income growth.”

“A modest improvement in sales activity should then follow, which will reignite home price appreciation heading into 2024.”

Read also: Mortgage rates reach new heights as it closes in on 7%

The influence of location

House prices will drop according to the location.

Jeff Tucker says the cooling will be regional compared to price hikes during the pandemic.

At the time, house prices rose in markets across the country.

The declines will be most noticeable in the places with the larger gains during the pandemic.

Tucker referred to the West and the Sunbelt, with cities like Austin, Boise and Phoenix.

“Nationally, we might see a 5% decline from the peak,” he explained.

“But prices will decline by more in the West, and there will be a smaller decline in the Southeast.”

According to Zillow, house prices have fallen month-to-month in pandemic hotspots, including:

  • Austin, down nearly 1%
  • Las Vegas, down 1.9%
  • Phoenix, down 2.3%

Prices in Boise, Idaho, rose nearly 60% during the pandemic, but it is already seeing annual drops.

According to Zillow, prices fell 3.9% year-on-year in September.

“A number of metro areas, especially in the West, will see some year-over-year price declines this spring,” said Tucker.

“That will be the worst comparison time because that’s when many markets reached their peak.”


Home prices are finally falling. But how low will they go?