Are Home Prices Going to Drop?
It’s no secret that inflation has improved over the past couple of months, but it has edged up a little with the rising cost of goods and transportation. The Federal Reserve has indicated that interest rates could drop over the coming months. There is still a possibility of rate hikes, depending on what happens with inflation and other economic factors, but so far, the future looks hopeful. Lower rates would make it more affordable for people to buy a home.
What does this mean for the price of homes? While home value appreciation is expected to slow down some, it isn’t yet clear if home prices will decrease. Given recent trends, some areas may experience a price increase of around 3-4%, while others may see a 1-2% drop. Prices are directly connected to housing inventory. If there is a considerable increase in inventory, home values will remain high.
The number of homes on the market is still very low, especially here in the DMV area, and is showing a declining trend compared to the same time last year. To reach a balanced market, around 5 to 6 months of supply needs to be available at a given time. The current inventory is only enough for at most a 3-4 month supply. Inventory levels will improve somewhat in 2024, which could help with home prices. However, likely, new home construction will not reach healthy levels until some time in 2025.
All of the above indicates that home prices are unlikely to drop significantly in 2024. Until we see any significant changes to interest rates, inventory levels, or home prices, it will remain mostly a seller’s market. In the DMV area, we are quite sheltered because of the proximity of many military bases and government. As long as military families PCS and with this being an election year and the potential for a change in our government exists the housing market in the area remains strongly a seller’s market. The market can change quickly though, so if you’re ever curious about our local conditions or want to discuss how the latest market trends may affect you, reach out anytime.
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