Strategist: House Prices May Decline During the Next Six Months

 

Strategist: House Prices May Decline During the Next Six Months

An investment strategist says that home prices could fall over the next six months as inventory rises by the largest margin since the financial crisis. One strategist predicts that home prices could decline as soon as the summer ends.

This is due to a sharp rise in unsold homes, with inventory rising 16% yearly in April. This is the highest increase in unsold inventory recorded since the Great Financial Crisis.

There's good news for marginalized homebuyers: Buying a home may be about to get cheaper.

That's according to Brian Nick, a senior investment strategist at the Macro Institute, who calls for home prices to decline over the next three to six months. Nick said more inventory is slowly making its way into the housing market while demand cools, easing the supply-demand imbalance that has pushed prices to record levels over the past year.

According to National Association of Realtors data, pending home sales fell 7.4% year over year in April. Meanwhile, the number of unsold homes on the market rose 16% in April compared to the same period in 2023. Nick said that represented the highest annual increase in unsold inventory since the Great Financial Crisis.

The shift comes as mortgage rates hover around 7% throughout 2024, and stubbornly high borrowing costs finally appear to impact buyer demand.

"As interest rates go up, what you tend to see is inventories of unsold homes go up," Nick said in a recent interview with Bloomberg Watch. "On a percentage basis, we've seen that rise. This will put downward pressure on prices in three to six months."

Nick expects prices to start falling by the end of the summer after the peak home-selling season ends.

Buyers would welcome any decline, many of whom have been sidelined over the past year or more amid rising borrowing costs and historically high home prices. According to Redfin data, the median sales price of a U.S. home rose 6% year over year in April, reaching a record high of $433,558.

Real estate experts generally expect housing affordability to improve over the next year. According to Redfin, home prices have begun to decline in major urban markets, and many homes are seeing price declines.