You might be wondering if home prices are set to crash. Surprisingly, some people might even be hoping for such a scenario, thinking it could finally make homes more affordable. However, experts agree that a significant price drop isn’t likely – and here’s why.
The Demand-Supply Imbalance
The primary factor driving home prices is the simple principle of supply and demand. When more people want to buy homes than there are homes available for sale, prices naturally rise.
Currently, the U.S. housing market is experiencing a substantial shortfall, with millions more buyers than available homes. This imbalance is the key reason national home prices aren’t expected to drop anytime soon. David Childers, President of Keeping Current Matters (KCM), emphasizes this point:
“The main driving force on pricing is the limited amount of inventory in most markets across the country. That issue is not going to be solved overnight or in the next twelve months.”
Understanding the Shortage
How did we reach this point of limited supply? For over 15 years, homebuilders have struggled to construct enough homes to meet demand. Following the 2008 housing crisis, new home construction slowed dramatically. While there has been a gradual recovery in recent years, it hasn’t been enough to close the gap (see graph below).
This persistent shortfall in housing inventory continues to keep upward pressure on home prices, making it unlikely that a national price crash will occur. As the market works to address this supply issue, homebuyers should remain informed and strategic in navigating their options.
The Housing Market: A Look at Rising Demand and Future Trends
Despite a surge in new construction in recent years, builders are still struggling to meet the growing demand for homes. According to AmericanProgress.org, the housing market isn’t just falling short of current needs—it’s also grappling with the effects of years of underbuilding.
As long as this housing shortage persists, home prices are expected to stay steady or even rise in many areas.
What Can We Expect Next Year?
Most experts anticipate that home prices will continue to increase in the coming year, though at a slower and more sustainable pace. (See the graph below for details.)
Understanding Home Prices: Why Local Markets Matter
It’s important to remember that home prices aren’t one-size-fits-all—they vary significantly by market. National trends may not fully reflect what’s happening in your area.
In markets with more available inventory, price growth may slow or even see slight declines. However, in areas where inventory remains tight, prices are likely to keep climbing—a pattern seen across much of the country. This is why partnering with a local real estate expert is so valuable. They can provide insights specific to your market and help you navigate the trends in your area.
Bottom Line
The key to price changes lies in supply and demand. With limited inventory still a factor in most markets, home prices are expected to stay steady or continue rising.
