Home Prices Are Finally On The Decline! Here's Why.

📆This Week’s Topic

Home prices are dropping for the first time in what feels like forever. Home prices just seem to keep climbing because sellers are unwilling to seriously drop their prices for new homeowners. This is changing today because for the first time since September of 2022, sellers are willing to negotiate with buyers with more flexibility and prices are dropping slightly because sellers want a faster sale. However, sellers are not the only ones who are more open, builders are now lowering prices and negotiating to get a faster sale and clear their inventory.

💳 The Issue

The big issue with housing is the price vs wage issue. The average price of a home in the US currently is $502,700. The average wage per year is around $69,000. This means that it would take you 14 years to buy a house if you saved half of your income. Normally, people get mortgages, so it doesn’t take as long for a down payment. This makes it really expensive to buy a house. Existing sellers struggle to sell their houses because there aren’t enough buyers, but sellers don’t usually budge because they want to sell their house for how much it’s worth. In addition, to that when most existing sellers bought their homes when the mortgage rates were really low like at 3% compared to the 7%, we have now. This makes it so they want to squeeze as much cash from the house as possible.

That has been the narrative for the last 5-6 years. Only now, sellers are willing to accept lower prices and negotiations with the buyer and not standing completely firm on their asking price. An example of this is that more than 20% of house listing dropped their price to compete in the market and make a faster sale. This means sellers are actually being more lenient with their prices making houses sell for cheaper overall. This also applies to builders as well, 43% of builders cut their prices this October representing their flexibility on price for faster sales.

📊 How Does This Affect My Wallet?

For aspiring homeowners, this is really good news! It means that homeowners can get a cheaper price from both existing sellers that have houses or builders who are willing to build houses with major discounts. For home sellers, this news is not as good. It means the house you have been trying to sell for a good price for years may end up selling lower than you originally wanted. So here are some tips for new home buyers:

🔚 Outcome

The outcome of these price drops is likely going to compound. This means that as more people to decide to decrease selling price of their home, more people will follow suit to keep their listing competitive. This means that the gap between wages and home prices may become a less insane statistic as the gap decreases. This could also potentially add many people to the real estate game as prices decrease that weren’t considering buying a house but are now because fo these price drops.

⏳ Final Summary

In summary, home prices are on the decline now. For many years, the narrative has been that home prices are so much higher than wages and no one can buy homes anymore. But now, as much as 20% of home sellers are dropping their listing price in order to make a faster sale. This means that these sellers are more willing to negotiate on price if that means they could sell their home faster.

🙏Thank You & Important Information

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Best,

Jacob Gans

Friday Finance