Home prices are expected to decline slightly this year before growing again in earnest in 2024.
“We had been among the more bullish outlooks for this year for home prices, and we've taken our home price growth forecast and revised it so we expect home prices to slip for the year, but less than 1%,” Danielle Hale, Realtor.com’s chief economist, told Yahoo Finance Live (video above).
“We'll start to see home prices rebound more convincingly in 2024,” she added.
Still, the pace of growth will be nothing like sellers or buyers have seen in a while. A normal pace, that is.
For instance, 117 economists and housing experts polled by Zillow expect home prices to increase at an annual rate of 3.5% until 2027 after bottoming out this year. That would be a more stabilized trend last seen in the 1990s before the housing boom and bust of the 2000s and follows the rapid run-up in housing values during the pandemic.
“A return to more normal growth would be welcome after the rollercoaster ride that home prices have been on lately,” Jeff Tucker, Zillow’s senior economist, said in the survey release.
Return to normal growth
The annual return on single-family homes reached nearly 13% between 2021 and 2022 — with the median US single-family home selling at $373,700 in June of 2021 and $420,900 in June 2022, according to data tracked by the National Association of Realtors.
That’s a sharp contrast to so-called normal growth. For instance, the median price of a single-family home grew 63.5% from $85,400 in 1987 to $139,600 in 2000, or an average annual increase of 4.8% over those 13 years, according to data provided by the National Association of Realtors.
Although housing prices are declining versus last year, they have been up month over month for the last three months. For instance, the latest S&P CoreLogic Case-Shiller US National Home price index showed prices dropped 0.2% annually in April but increased by 0.5% compared with March.
Much of that increase is because of an imbalance in supply and demand. The number of previously owned homes on the market was at a record low in May, which helps to keep prices elevated, according to the National Association of Realtors.
Buyers are also turning to new homes — but with price still in mind.
“There is one piece of information from the new home sales data that suggests that it's not that buyers are interested in everything, they're interested in affordable homes,” Hale said. “And so if you look at the price distribution of homes that were sold in the new home sales data, you see an increasing share of homes were sold under the $300,000 price point. So buyers are out there and most interested in homes at that affordable price point.”
Buyers may find better deals later this year. Hale expects those price increases seen in spring and summer to slow as the most popular time for homebuying winds down.
“There's a strong seasonal pattern in the housing market. We tend to see the highest prices of the year in the summer and the lowest prices of the year in fall and winter. So that trend is happening,” she said. “I expect that we will see the usual cooling-off that we see in the fall.”
Rebecca Chen is a reporter for Yahoo Finance and previously worked as an investment tax certified public accountant (CPA).