ALL NEWS

Home prices are finally falling. But how low will they go?

Oct 22, 2022, 8:00 PM | Updated: Oct 24, 2022, 2:38 pm

The Provo-Orem area is the second-best place in the nation to buy a house for first-time homebuyers...

The Provo-Orem area is the second-best place in the nation to buy a house for first-time homebuyers.(AP Photo/Matt Rourke)

(AP Photo/Matt Rourke)

(CNN) — The US housing market is in the midst of a major shift. After two years of stratospheric price appreciation, home prices have peaked and are on their way back down.

“Good news for home buyers, sellers are dropping their home prices”

But what homebuyers and homeowners alike want to know is: How much lower will prices go?

The short answer: Prices are likely to drop further, but not by as much as they did during the housing bust. From the 2006 peak to the 2012 trough, national home prices fell by 27%, according to S&P CoreLogic Case-Shiller Indices, which measures US home prices.

“It was different in 2008, 2009 because that drop in prices was because of a push from sellers,” said Jeff Tucker, senior economist at Zillow. “Because of foreclosures and short sales there were a lot of extremely motivated sellers who were willing to take a loss on their homes.”

Plus, that housing crash came at a time when the inventory of homes for sale was four times higher than it is now. Current inventory is still substantially lower than pre-pandemic levels, which has increased competition for homes. And that is keeping prices relatively strong.

“I would be surprised to see prices anywhere drop below where they were in 2019,” said Tucker. “There was some overheating in the housing market in 2021 through this spring that pushed prices higher than what the fundamentals would support. Now they are coming down.”

How low will prices go?

“Home prices in Salt Lake City harbinger of a national trend?”

With mortgage rates more than doubling since the start of this year, the calculations for a homebuyer have changed considerably. The monthly principal and interest mortgage payment on the median priced home is up $930 from a year ago, a 73% increase, according to Black Knight, a mortgage data company.

When you factor in soaring mortgage rates, along with elevated home prices and wages that aren’t increasing as fast, buying a home is less affordable now than it has been in decades, according to Black Knight.

But there may be some relief in sight for buyers.

Economists at Goldman Sachs expect home prices to decline by around 5% to 10% from the peak hit in June.

Wells Fargo has recently forecasted that national median single-family home prices will drop by 5.5% year-over-year by the end of 2023.

Wells Fargo’s economists estimate that the median price for an existing single family home to be $385,000 this year, up 7.8% from last year, but the growth will be a lot less than the 19% year-over-year increase seen in 2021.

The economists anticipate the median home price will fall to $364,000, a decline of 5.5% from this year. They predict prices will rebound and rise again in 2024, with the median price ticking up 3.3% to 376,000 by the end of 2024.

“The primary driver behind the housing market correction thus far has been sharply higher mortgage rates,” the Wells Fargo researchers wrote. “If our forecast for Fed rate cuts is realized, mortgage rates are likely to fall slightly just as cooling inflation pressures boost real income growth. A modest improvement in sales activity should then follow, which will reignite home price appreciation heading into 2024.”

Location, location, location

“High home prices getting you down? Unrelated buyers can share cost.

Ultimately, how much prices fall will depend on where you live.

Unlike the run-up in prices during the pandemic that caused home values in markets across the country to surge, the cooling off will be more regional, said Tucker. The drops will be more deeply felt in places where there were larger gains during the pandemic, many of them in the West and Sunbelt, including cities like Austin, Phoenix and Boise, he said.

“Nationally, we might see a 5% decline from the peak,” Tucker said. “But prices will decline by more in the West and there will be a smaller decline in the Southeast.”

In September, month-over-month home prices dropped in several pandemic hotspots, including Phoenix, down 2.3%; Las Vegas, down 1.9% and Austin, down nearly 1%, according to Zillow.

And Boise, Idaho, where prices surged nearly 60% during the pandemic, is already seeing annual declines, with prices falling 3.9% year over year in September, according to Zillow.

“A number of metro areas, especially in the West, will see some year-over-year price declines this spring,” said Tucker. “That will be the worst comparison time because that’s when many markets reached their peak.”

We want to hear from you.

Have a story idea or tip? Send it to the KSL NewsRadio team here.

All News

One Utah resident casts his vote in a blue voting booth....

Bridger Beal-Cvetko, KSL.com

What to watch for on a busy Utah primary election day

Utah's primary election is today. What should you expect?

13 minutes ago

Two missing in Grand County...

Amie Schaeffer

Search and rescue underway for 2 missing in Grand County

MOAB, Utah — According to the Grand County Sheriff’s Office, two people have gone missing in the Steel Bender Off Road Trail area. A search and rescue effort is underway by multiple agencies.  The missing are said to be one male and one female who were recreating in the area. A utility terrain vehicle belonging […]

17 minutes ago

A semi-truck drives down a road....

Kyle Remund

Utah Inland Port Authority adopts Castle Country area project

The Castle Country Inland Port is set to be built as an economic boon to areas once dependent on coal mining.

3 hours ago

Julian Assange greets supporters at the Ecuadorian embassy in London....

Kyle Remund

Julian Assange, Wikileaks founder, reaches plea deal with U.S. government

The longtime activist, hacker, and journalist, Julian Assange, has entered a plea deal in connection with the 2010 Chelsea Manning leaks.

4 hours ago

South Jordan officials say more people are using bikes, but not necessarily on roads shared with au...

Simone Seikaly

As growth continues, South Jordan looks to bikes and more trails

South Jordan officials say more people are using bikes, but not necessarily on roads shared with automobiles.

4 hours ago

A Utah County ballot drop box in 2022. Recently sent out Utah County ballots say you need to provid...

Lindsay Aerts, KSL TV

County clerks hope for last-minute turnout for Utah primary elections

Utahns are making a last-minute push to the ballot box to make sure their votes are counted before Tuesday‘s primary election.

5 hours ago

Sponsored Articles

Underwater shot of the fisherman holding the fish...

Bear Lake Convention and Visitors Bureau

Your Bear Lake fishing guide

Bear Lake offers year-round fishing opportunities. By preparing ahead of time, you might go home with a big catch!

A group of people cut a purple ribbon...

Comcast

Comcast announces major fiber network expansion in Utah

Comcast's commitment to delivering extensive coverage signifies a monumental leap toward a digitally empowered future for Utahns.

a doctor putting her hand on the chest of her patient...

Intermountain Health

Intermountain nurse-midwives launch new gynecology access clinic

An access clinic launched by Intermountain nurse-midwives provides women with comprehensive gynecology care.

Young couple hugging while a realtor in a suit hands them keys in a new home...

Utah Association of Realtors

Buying a home this spring? Avoid these 5 costly pitfalls

By avoiding these pitfalls when buying a home this spring, you can ensure your investment will be long-lasting and secure.

a person dressed up as a nordic viking in a dragon boat resembling the bear lake monster...

Bear Lake Convention and Visitors Bureau

The Legend of the Bear Lake Monster

The Bear Lake monster has captivated people in the region for centuries, with tales that range from the believable to the bizarre.

...

Live Nation Concerts

All the artists coming to Utah First Credit Union Amphitheatre (formerly USANA Amp) this summer

Summer concerts are more than just entertainment; they’re a celebration of life, love, and connection.

Home prices are finally falling. But how low will they go?