Thomson Reuters
- Home prices could start falling as soon as the end of summer, one strategist predicts.
- That's due to a sharp rise in unsold homes, with inventory climbing 16% year-per-year in April.
- That's the highest increase in unsold inventory recorded since the Great Financial Crisis.
There's good news for sidelined homebuyers: buying a house may be about to get cheaper.
That's according to Brian Nick, a senior investment strategist at Macro Institute, who's calling for a drop in home prices that could take place over the next three to six months. That's because more inventory is slowly making its way to the housing market while demand is cooling off, Nick said, alleviating the supply-demand imbalance that has pushed prices to record highs over the last year.
Pending home sales dropped 7.4% year-over-year in April, according to data from the National Association of Realtors. Meanwhile, the number of unsold homes on the market rose 16% in April compared to the same time in 2023. That represents the highest yearly increase in unsold inventory since the Great Financial Crisis, Nick said.
The shift comes as mortgage rates have hovered around 7% for all of 2024, and the stubbornly high borrowing costs appear to finally be weighing on buyer demand.
"As interest rates move up, what you tend to see is inventories of unsold homes rise," Nick said in a recent interview with Bloomberg Surveillance. "On a percentage basis, we've seen that move up. That's going to put downward pressure on prices in three to six months."
Prices will begin to decline around the end of the summer, after peak home-selling season is over, Nick predicted.
Any decline would be welcomed by buyers, many of whom have been sidelined for the last year or more amid high borrowing costs and historically high home prices. The median sale price for a US home rose 6% year-over-year in April, hitting a record-high $433,558, according to Redfin data.
Real estate experts generally expect housing affordability to improve over the next year. Home prices are beginning to decline in key metropolitan markets, and a growing number of homes on the market are seeing a price cut, according to Redfin.