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.
[2024-2029 Housing Market Predictions]
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.
— Month-over-month home price declines. If the median home sale price in August was lower than in July, for example, that’s considered a declining month-to-month price. However, because of the largely seasonal nature of the housing market, month-to-month numbers are often considered too volatile to indicate changing trends unless placed into a larger context.
— Year-over-year home price declines. If the median home sale price in August 2024 was lower than in August 2023, the median price has experienced a year-over-year decline.
— Declining home values. A declining home value occurs when the appraised market value is less than the price a buyer paid for it.
Are Home Prices Dropping?
On a national scale, home sale prices have increased consistently year-over-year since July 2023. Redfin data shows that the median sale price for August 2024 was $432,961, a 3.0% year-over-year increase compared with the same period in 2023.
Although 19.9% of houses dropped their prices in August 2024, the sale-to-list price remains at 99.2% and has remained above 98% since February 2023, likely due to the ongoing housing inventory crunch. Basically, this means that buyers are giving sellers almost exactly what they’re asking for their homes, rather than trying to come in with significantly lower offers, which commonly happens in a buyer’s market.
“We’re seeing houses being listed and sold relatively near their listing price,” says Chris Stroud, co-founder and chief of research for HouseCanary, an AI-powered national real estate brokerage. “Cuts are coming down significantly, as sellers are reluctant to abandon low rates while also selling their home at a discount.”
When you consider a five-year window, housing prices have gone from a median sales price of $297,369 in August 2019 to $432,961 in 2024, which is a 45.6% increase. Experts predict this rate of growth won’t continue, though.
“Prices remain near all-time highs, up 5% year-over-year and mortgage rates have pulled back 170 basis points from multidecade highs reached in October 2023,” says Stroud. “Nationally, inventory is up 27% year-over-year, now reaching the highest levels post-COVID, although inventory still remains below pre-COVID levels. Decreasing rates, increasing inventory and slowing price growth all point to a more neutral market environment, a welcome change from the strong seller’s market experienced over recent years. We expect these trends to continue into 2025.”
[READ: The Most Undervalued U.S. Housing Markets]
Where Are Home Prices Falling?
By August 2023, it looked like the median homebuyer might get some relief from price pressures, but that was not to be. A year later, median sales prices were once again up another 3.0% nationally. So, not only were prices not dropping constantly, many started rising again.
Even the cities with the highest estimated outbound migration — Los Angeles; New York City; San Francisco; Seattle; and Washington, D.C. — haven’t seen consistent price drops, according to Redfin.
— Even with its No. 1 position for outbound migration this year, Los Angeles saw only a 3.7% decrease in homes sold year-over-year in August 2024, pushing prices up another 2.3% in the same time period.
— The Big Apple saw a substantial decrease in homes sold, down 14.1% year-over-year for August 2024. Despite this, the median sales price for all home types dropped just 0.36% in the same period.
— Migration trends are starting to move the needle in San Francisco. In August 2024, the number of homes sold year-over-year had increased by 9.1% and the year-over-year median sales price decreased by 7.6% — that market may be getting a bit saturated.
— Seattle’s story is one of fewer homes for sale, down 9.4% year-over-year in August 2024, pushing sales prices upward. The median sales price saw a 4.3% increase in the same period.
— Despite a significant drop in homes sold since August 2023 — 19.9%, to be exact — Washington, D.C., prices have inched slightly upward by 0.8% year-over-year, so little as to not be meaningful.
Recent data from RE/MAX also reported similar findings, with very little change detected in the most declining markets, says Amy Lessinger, president of RE/MAX. “According to the RE/MAX National Housing Report for August, out of the data pulled from 50+ markets, the ones with the biggest year-over-year decrease in median sales price were Tampa, Florida, at -1.3%, Dallas, Texas, at -1.3%, San Antonio, Texas, at -1.6%; and Bozeman, Montana, at -2.1%.”
There haven’t been significant price drops across the board, and in many markets home prices are still increasing, says Lessinger.
“The median sales price dropped for the second consecutive month to $440,000, 1.1% below July, but remained 3.5% higher than the $425,000 median recorded in August 2023,” she says. “Overall, the median sales price has remained higher year over year for 14 consecutive months since June 2023.”
[READ: Most Overvalued U.S. Housing Markets]
What Will Happen to Home Prices Next?
With many contributing factors, there’s no guarantee what will happen next in the real estate market. There are many elements that have created a market unlike others we’ve known, making it difficult to model future pricing.
“Inventory has been steadily increasing with a significant rise in new listings compared to last year,” says Lessinger. “This growth, paired with potentially lower mortgage rates, could improve purchasing power for buyers and offer more options. To sustain this momentum and alleviate affordability concerns, it will be crucial for inventory to continue expanding, ensuring that buyers have more opportunities to find homes that fit their needs and budgets.”
The fact that many homeowners have opted not to sell at this time — in many cases to avoid taking on a higher mortgage interest rate for the next home they would purchase — is one of a handful of factors that seem to be keeping changes to home values relatively slow-paced.
“Many existing homeowners are sitting with a very low mortgage rate and have not been incentivized to sell,” says Sturtevant. “But there are some people who are going to have to sell and move because of life or career changes. We will likely see listing activity increase some this fall as people swallow the bitter pill of having to take on a higher mortgage rate.”
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When Will Housing Prices Drop? originally appeared on usnews.com
Update 10/10/24: This story was published at an earlier date and has been updated with new information.
