Housing Market Update: When Will Prices Come Down?

The increase in available homes and a notable slowdown in price growth suggest more affordable options are on the horizon for new homebuyers, potentially offering them the break they've been waiting for.

With the inventory of available homes rising 14.8 percent compared to last year, and median list prices showing minimal growth, the current trend could lead to median home list prices dropping below 2023 levels as early as this month. That's according to Realtor.com's February 2024 Monthly Housing Market Trends Report.

The shift, fueled by a combination of increased supply and price deceleration, marks a potential turning point for buyers sidelined by previous market conditions. Amid fluctuating mortgage rates and cautious optimism from Realtor's economics research team, the spring season is poised to offer a more favorable landscape for those looking to enter the housing market.

Affordable Home Inventory Grows, But Challenges Remain

The increase in overall housing inventory by 14.8 percent in February compared to last year signals a move towards a buyer-friendly market, according to the Realtor report. The fourth consecutive month of annual inventory growth has resulted in the highest level of available homes since 2020, offering competitive pricing hopes for prospective buyers.

However, despite the positive trends, inventory levels remain lower than the more robust pre-pandemic years, pointing to the ongoing struggle to return to the norm.

Realtor's spotlight on homes priced between $200,000 and $350,000—which saw the highest inventory growth at 20.6 percent in February—underscores a market adjusting to the demand for more affordable housing and reflects a broader trend of slowing home price growth.

In February, the national median list price edged up to $415,500, a modest increase from $409,500 in January, and showed only a slight 0.3 percent year-over-year growth. That deceleration in home price growth, coupled with an increase in inventory—particularly in a more affordable price range—signals a shifting dynamic, Realtor said.

Buyers are beginning to see the effects of the slowdown, with a rising share of listings (1.4 percent) seeing price reductions—the highest February levels since 2019. The trends indicate a market moving towards greater affordability and accessibility, albeit still within the constraints of post-pandemic recovery and ongoing economic uncertainties.

Newsweek has reached out to Realtor's economic team and the authors of the report for comment by email on Tuesday morning.

Regionally, the growth in inventory has been notably uneven across the U.S., with steep increases in Southern metros such as Orlando, Miami and Tampa. The regional variation points to where potential buyers might find more favorable conditions, especially those looking for homes in the more affordable range.

Conversely, the decline seen in inventory in Western and Northeastern metros signals tighter conditions, where buyers may face more competition and fewer options.

Still, fluctuating mortgage rates, having peaked at over 8 percent in October before dipping and then rising again, play a role in determining market heat. The Federal Reserve's cautious stance amidst fluctuating economic indicators has led to increased mortgage rates in late February, Realtor said, adding another layer of complexity for potential buyers.

The rate changes, directly influencing affordability and buying power, could potentially slow down the market's momentum heading into spring, according to the report.

Taken together, the Realtor report suggests a housing market at a potential turning point, with increased inventory and stabilized prices hinting at a more buyer-friendly environment.

Yet, the full impact of the changes will depend on multiple factors, including future mortgage rate movements and regional market dynamics.