Are you hoping for home prices to crash so you can buy a more affordable property? Experts agree that’s not on the horizon, and here’s why. The housing market is heavily influenced by supply and demand, and currently, there are far more buyers than available homes. This imbalance is the driving force behind rising prices. Let’s dive deeper into what’s happening nationally and why home prices aren’t expected to drop anytime soon.

Understanding Supply and Demand

The housing market operates like any other market: when demand exceeds supply, prices rise.

In the U.S., the housing shortage is significant. Estimates show a shortfall of several million homes, meaning demand far outweighs the supply of homes available for sale. David Childers, President of Keeping Current Matters (KCM), explains:

“The main driving force on pricing is the limited amount of inventory in most markets across the country. That issue is not going to be solved overnight or in the next twelve months.”

This lack of inventory is why home prices remain steady or continue climbing, even as some buyers wait for a decline.

Why Is There a Housing Shortage?

For over 15 years, homebuilders haven’t constructed enough homes to meet buyer demand. Following the 2008 housing crisis, construction slowed significantly, and only recently have builders started to catch up.

Even with increased construction in the past few years, the pace hasn’t been sufficient to close the gap. According to AmericanProgress.org, today’s building rates still aren’t meeting current demand, let alone compensating for years of underbuilding.

Take a look at the graph below that highlights the trend in homebuilding over the past two decades:

Until builders can significantly increase the housing supply, prices will likely remain stable or increase in many areas.

What About Next Year?

The majority of experts predict that home prices will continue to rise in 2025, but at a slower, healthier pace compared to recent years. This gradual increase reflects a more balanced market.

Here’s a graph showing projected price growth trends:

It’s important to note that price trends vary by location. While national trends suggest steady or increasing prices, local markets with more inventory may see slower price growth or slight declines. Areas with tight inventory, however, are expected to experience continued price increases.

That’s why it’s crucial to work with a local real estate expert who understands your market. They can provide insights specific to your area and help you navigate buying or selling in today’s conditions.

Bottom Line

If you’re wondering what needs to happen for home prices to come down, it all boils down to supply and demand. With inventory shortages persisting in most markets, prices are expected to remain steady or continue rising.

To understand what’s happening with home prices in your area, let’s connect. Together, we’ll analyze the market trends and create a plan that works for your real estate goals.