It's one of the questions I hear whenever the real estate market starts changing:
"Do you think home prices are going to drop?"
Maybe.
Maybe not.
And I know that's not the exciting answer.
But I don't think anyone should make a major real estate decision based on somebody pretending they know exactly what home prices will do next.
I'd rather look at what's actually happening.
Start With Supply and Demand
Home prices ultimately come down to buyers and sellers.
If there are far more homes available than buyers looking for them, sellers have to compete harder.
That can put downward pressure on prices.
If inventory is limited and plenty of buyers are competing for homes, prices tend to be more resilient.
That's why inventory is one of the first things I watch.
But There Isn't One Price for "The Market"
This is something we've talked about throughout this quarter.
A $250,000 home and an $800,000 home aren't necessarily experiencing the same market.
One price range might have limited inventory and strong buyer demand.
Another might have plenty of choices and homes sitting much longer.
Even neighborhoods within Sioux Falls can behave differently.
Watch What Sellers Are Actually Doing
Another clue is price reductions.
One seller reducing a price doesn't tell us much.
But if a large percentage of competing homes are reducing prices, that's information.
So are:
Longer days on market.
More seller concessions.
Homes closing below asking price.
More inventory.
Fewer competing offers.
Those are signals that buyers may be gaining leverage.
Affordability Matters Too
Home prices don't exist by themselves.
Buyers make decisions based on the monthly payment.
Interest rates, taxes, insurance and other ownership costs all affect what someone can comfortably afford.
If affordability gets stretched too far, buyers eventually respond.
So Are Prices Going to Drop?
The better answer is:
Some homes might. Some price ranges might. Some neighborhoods might.
Others may remain stable or even increase.
That's why I wouldn't make a buying or selling decision based solely on a prediction about where the entire housing market is headed.
I'd look at the market that actually matters to you.
Your neighborhood.
Your price range.
Your competition.
Your financial situation.
And your reason for moving.
Because the goal isn't to perfectly predict the market.
It's to make a good decision with the information we have today.
If you're wondering what's happening specifically with home values in your neighborhood or price range, I'm always happy to help you take a closer look.
