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How Low Will Home Prices Go?

How Low Will Home Prices Go?

Mortgage lenders, economists, investors, and people considering buying or selling real estate have been keeping a close eye on the housing market over the last eight months. Shakeups from inflation, geopolitical instability, rate hikes, and the hangover of the pandemic are impacting baseline factors like mortgage rates and home prices. Some of these trends have remained steady in recent months, while others are primed for change – and with that comes opportunity for prospective homebuyers.

Let’s take a look at recent sales data and how Mortgage Maestro Group can help you optimize your position in this market.


We all know that there is bound to be a cooling off period from the red-hot housing prices seen in 2021 and 2022, providing an opportunity for homebuyers—we’ve just been waiting for it to hit! The National Association of Realtors data for October shows home prices have climbed for 128 consecutive months in the wake of the pandemic. Regardless of region, the median price of homes in the US increased from $355,000 to $379,000 this October, year-over-year. This has presented a challenge to homebuyers, who have had to jockey for position with competitors for years now by making all-cash offers or overpaying to get to the front of the line. The good news for buyers is that there are signs that this upward climb may be slowing.


While prices have steadily risen over the past 12 months, the same cannot be said for home sales. Year-over-year existing home sales have dropped by nearly 2 million for October. According to the NAR “From a year ago, all four regions had double-digit declines in sales in October. The West had the most significant dip at 37.5%, followed by the South, which fell 27.2%. The Midwest decreased by 25.5%, followed by the Northeast, down 23.0%.” It might seem reasonable to think that with sales falling so consistently, we might expect prices to follow, but there are some important things to keep in mind. Two big factors are demand and inventory. Housing inventory is nearly identical year over year in October, telling us that demand is still high and supplies are lacking. This is vastly different from the mortgage downturn in 2008, where supply skyrocketed due to low demand.


The decrease in overall sales, combined with the nationwide increase in mortgage rates, are indicators that we could be seeing a reduction in prices next. Big banks and hedge funds like Goldman Sachs are expecting that we will see a corresponding reduction in home prices following the drop in sales that has taken place over the last 12 months. By the end of 2023, Wells Fargo is forecasting a year-over-year price reduction of over 5%. If you have been waiting for the market to cool before purchasing a home, the next six to eight months could be a great time to begin shopping.


The key to taking advantage of this dip will be avoiding the increase in mortgage rates that we have also been tracking. Once those rates come down, buyers will return to the market, and it is not expected inventory will catch up to demand for a few years. The lack of inventory once rates come down will likely lead to upward price pressure on homes. An important piece of data to know, is that in Colorado as example home prices have averaged 14% appreciation over 40 years. With average home prices soaring from $100K in 1980 to just under $600K in 2020 (higher now). Take the long view on real estate, it will help you mentally prepare to buy.

Our team at Mortgage Maestro Group has innovative strategies that can help. We also have options to temporarily or permanently reduce the rate.Give us a call or schedule a consultation!

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