Home Prices
Are Home Prices Dropping?
Given that every metro area is unique, there’s no simple one-size-fits-all answer to this question. Performance of the S&P/Case-Shiller U.S. National Home Price Index does suggest an upward trend, as does Federal Housing Finance Agency reporting. However, data aggregated on a national basis isn’t always relevant or valuable to people in markets where those trends aren’t reflected.
For example, Redfin has the median sale price of homes in New York at $764,000 in October 2023, which represents a 4.5 percent year-over-year (YoY) drop from the same period in 2022. PropertyShark tracked a similar drop in Manhattan, where the October median home sale price was $946,000, down 5.3 percent YoY.
Conversely, Los Angeles home sale prices were on an upward trend, with the median sale price in Los Angeles County being $893,650, a 4.6 percent YoY increase. The Phoenix metro area looks flatter by comparison at a 1.1 percent YoY increase in home sale price and a 6.6 percent decrease in the number of homes sold compared to October 2022.
While national figures may be useful for judging the overall health of residential real estate and the economy, they may not be relevant for homeowners who are trying to sell their home in their own unique local market.
Local real estate professionals should keep an ear to the ground all year long. The ones who have been assisting home buyers and sellers for many years have an implicit, in-depth understanding of trends in listing prices and how they compare to actual home sale prices in their designated market area (DMA).
These veteran real estate agents take into account all types of factors that may not be immediately obvious to homeowners and aren’t reflected in national median home sale price data. These can include variables like:
- Local housing inventories
- Median rental prices and vacancy rates in the DMA
- Changes in school districts, neighborhood socioeconomics and communities as a whole
- Local commercial development
- Unpredictable factors like highway construction and other infrastructure projects
Skilled real estate agents combine knowledge and analysis of data with less tangible but equally important factors to help home sellers move their homes as quickly as possible for an optimal price.
How Economic Conditions Impact Home Prices
A robust economy with near full employment and rising real wages typically leads to increased home prices. In other words, people who feel confident in their jobs and future prospects don’t worry about their ability to pay for a new home. More people shopping for homes inevitably leads to higher prices – especially if residential real estate inventories aren’t increasing at the same pace.
Interest Rates
Current interest rates are a commonly cited (and valid) concern for modern home shoppers. A homeowner with a 3.5 percent interest rate on their current home loan might be less inclined to buy a new home knowing they might only qualify for an 8 percent interest rate today. This can lead to slower home price growth, or in some cases, price decreases as fewer people enter the market.
It’s important to do your own research before making assumptions about your potential rate. You may want to consult with two or three local lenders to get an actual idea of the rates you qualify for. Banks, credit unions and other loan originators can do soft inquiries (that won’t impact your credit score) to give you at least a basic idea of the kinds of rates you can expect on a new mortgage.
Also keep in mind that the interest rates on mortgages, even fixed-rate loans, can potentially be lowered in the future through refinancing.
History Repeats Itself – Which Is Good News for Home Buyers and Sellers
From a long-term perspective, the data clearly shows that home prices tend to rise. Housing markets are inevitably cyclical. There are periods of growth followed by corrections, followed by growth and so on. Taking a longer view may be useful when you’re trying to determine whether now is a good or bad time to buy or sell.
When It Comes to Buying or Selling a Home, Do What’s Right for You
As of 2022, there were more than 85 million owner-occupied homes in the United States. There’s no one-size-fits-all real estate truism that can be applied to all those homeowners.
Should you pass up a job opportunity because it will require you to sell your home, relocate and finance your new home purchase at a higher interest rate? Every home buyer has to answer those types of questions for themselves.
Consulting with local real estate experts and lenders can help ensure the guidance you receive is accurately informed.
When it comes to real estate – do what’s right for you. At 72SOLD, we’re committed to making sure it’s never a bad time to sell for our clients. We have a proven system that results in 8.4 to 12 percent higher bids compared to similar properties in any given MLS. Learn more about our process by consulting with our team today.
