Will real estate prices finally fall this fall? Expert opinion

COVID-19 has fundamentally changed many aspects of American life, so it should come as no surprise that it has had an impact on the housing market. During the pandemic, demand for new homes increased as people spent more time in their homes during lockdowns. Record low Mortgage interest rates also led to a massive increase in competition for homes, even as supply declined as people were reluctant to sell during the health crisis.

With borrowers flooding the market and few homes available for purchase, the average price of a typical home has increased 41% from January 2020 to August 2023, according to the Federal Reserve Bank of Chicago.

Unfortunately, the post-pandemic period brought further hardships as the Federal Reserve repeatedly increased interest rates in the face of rising inflation. This caused mortgage costs to skyrocket and created two problems for potential buyers. Home loans were less affordable and Housing stock declined as sellers decided not to put their properties up for sale and give up their low-interest loans.

“The systematic lack of inventory has a double negative effect: it reduces buyers’ purchasing power and deters potential sellers, further exacerbating already historically low inventory,” says Leo Pareja, CEO of eXp Realty.

The big question is: Will things get better this fall, or will the dreams of future homeowners be dashed by persistently high prices?

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Will real estate prices finally fall this fall?

Potential buyers hope for cheaper home prices this fall will probably be disappointed.

“Home prices have remained high in most areas despite higher mortgage rates, which would normally have reduced demand,” says Edward Coulson, professor of economics and public policy and director of the Center of Real Estate at the UCI Paul Merage School of Business. “There is no reason to believe that home prices will fall, especially if interest rates fall.”

Worse still, there is actually reason to believe that prices will rise rather than fall. In particular new inflation data shows that inflation is easing, the Federal Reserve is expected to Reduction of the overnight interest rate at which the banks lend money to each other. This is supposed to happen already in Septemberwhich in turn will likely lead to lower mortgage rates and increased demand for real estate, which in turn will lead to higher prices.

“I expect a very slight uptick in home prices next fall as we expect mortgage rates to start falling again after the Fed meeting in September,” said broker Sean Adu-Gyamfi of Coldwell Banker Warburg. “Buyers who held off last year due to higher interest rates will be actively re-entering the market. In this context, sellers may raise their asking prices by about 2 to 4 percent more than in previous months.”

Pareja's assessment of future price trends is similar. He believes prices are likely to remain stable or even rise due to falling mortgage rates. While Pareja explains that rates have recently dropped 100 basis points compared to post-pandemic highs, more rate cuts are expected in the coming months, which will likely increase demand.

“Once the new interest rates are firmly established, there will be more competition. If inventory doesn't increase, prices will trend higher due to the lower interest rates,” says broker Bill Kowalczuk of Coldwell Banker Warburg.

“On a $750,000 loan, a half-percentage point reduction in interest would mean a savings of $325 a month,” Kowalczuk said. “Over five years, that's almost $20,000. That would be enough to get buyers to buy. I think it's a good time for sellers, unless inventory increases dramatically.”

Melissa Cohn, regional vice president at William Raveis Mortgage, agrees.

“As mortgage rates fall and more buyers return to the market, prices are very likely to rise, especially in areas where supply is still relatively limited,” Cohn says.

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Some buyers may still find relief

While a broad Decline in home prices for many potential buyers this fall, that does not mean that NO Future homeowners will experience relief.

“How home prices perform this fall will depend a lot on where you are,” says Lisa Sturtevant, PhD and chief economist at Bright MLS. “In some places where home prices have risen particularly quickly in recent years and where supply has increased rapidly, we will see lower prices than we saw a year ago. In most other markets, I expect home prices to remain relatively stable compared to last year.”

Sturtevant says demand remains strong and that while inventories have increased slightly in recent months, they are still low by historical standards.

She also points out that while there are “no signs of a major decline in home prices,” there are still seasonal fluctuations in home costs.

“Prices traditionally fall seasonally from their summer peaks through the winter, and I expect this seasonal pattern to continue this year,” Sturtevant says.

The conclusion

Given the potential for rising real estate prices, many future homeowners may not want to Wait until mortgage rates drop or wait until property prices fall. Instead, they should quickly look for opportunities Get the lowest mortgage rate available Today. Prices have already fallen in 2024 and many Home loans with interest rates below 7.00% are available to qualified borrowers.

If you Find the cheapest mortgage and buy a home at today's prices, you will be better off in the coming months if prices rise as predicted. You can always Refinance your mortgage later, but you can't go back and buy at today's prices if they rise in the fall.