When Will Housing Prices Drop?
Despite concerns about falling home prices, the U.S housing market appears to remain stable. In August 2024, the median home price was $432,961, up 3% from the previous year, as reported by Redfin. Lower mortgage rates may encourage buyers to re-enter the market, increasing supply and demand.
Even high outbound migration cities like Los Angeles and Seattle haven’t seen much in terms of price drops, further reinforcing that the market is holding steady.
While affordability challenges persist, buyers may have slightly more negotiating power as sellers start offering concessions. However, with strong demand and inventory catching up slowly, any significant drop in home prices may be unlikely as we head into 2025.
According to U.S. News, for just about any homeowner, talk of falling housing prices can spark panic. For most people, their home is their single biggest investment and there’s a natural anxiety that comes with any potential threat to that investment.
On a national scale, housing market activity has shown a very small gain from the peak of 2022’s home prices. In August 2024, the median U.S. home price was $432,961, up just 0.03% from the prior peak of $432,823 in May 2022, according to Redfin. Year-over-year data indicates a small 3.0% increase in pricing versus August 2023’s $$420,846.
Despite a few blips month-to-month, housing prices really aren’t dropping in any significant way. With more buyers off the sidelines due to lower interest rates, and declining rates giving buyers more room to move, there’s little reason to expect that to change soon.
“Lower mortgage rates this fall will bring both more buyers and more sellers into the market,” says Lisa Sturtevant, chief economist for multiple listing service Bright MLS. “The biggest challenge to buyers right now is affordability. Declining rates will help, but many buyers will remain at their affordability ceiling. I’m expecting buyers to have a little more leverage in the market and for sellers to have to make concessions. However, with both demand and supply increasing, I’m expecting home prices to be pretty steady through the end of the year and into 2025.”
To help you better understand the data, we’re breaking down the different kinds of price drops, declines and decelerations you may hear about, as well as what this means for home prices now and in the future.
What Do Dropping Prices Mean?
When you hear about home prices dropping, it can mean one of a few things. Clarify which type of dropping price it could be:
- Listing price drops or price cuts. If a house is sitting on the market and not getting much interest, the listing agent and seller will likely have a conversation about dropping the home’s asking price. When you see more listing price drops on a larger scale, it’s a sign that a tight seller’s market is easing up and potentially starting to favor buyers. In August 2024, 19.9% of homes had experienced listing price cuts, up year-over-year from 17.3% in August 2023, but below the peak of 21.7% in October 2022, according to Redfin data. Listing price drops often coincide with longer median days on the market. In August 2024, homes nationally were on the market an average of 37 days, up from 31 days in August 2023.
- Deceleration of sale price increases. In some markets, home sale prices are still higher than they were a year ago, but growing at a much slower rate than previously. Redfin data indicates that the median sales price of a home once again peaked at $442,386 in June 2024. It was a small increase of just 4.0% year-over-year, unlike the last peak of $432,823 in May 2022, which was a significant jump of 14.7% from May 2021’s $377,224. However, between May 2022 and August 2023, prices were almost flat, with a small 3.2% decline to $420,846.
