The Truth Behind Rising Home Prices: What Will It Take for Them to Fall?

The Truth Behind Rising Home Prices: What Will It Take for Them to Fall?

You might be wondering if home prices are going to crash, and some people are even hoping for it so they can finally purchase a more affordable home. However, experts agree that’s not likely to happen—and here's why.

In the Sacramento area and across the nation, there are simply more people wanting to buy homes than there are available properties for sale. This imbalance between supply and demand is what drives prices higher.

Let’s break down the factors that make it unlikely for home prices to drop anytime soon, especially in our local market.

Prices Depend on Supply and Demand

The housing market functions just like any other market—when demand is high and supply is low, prices rise.

Currently, the U.S. is experiencing a housing shortfall of several million homes. This means there are far more buyers looking to purchase than homes available to meet the demand. This supply shortage is the key reason why prices aren’t expected to drop anytime soon. As David Childers, President of Keeping Current Matters (KCM), puts it:

“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.”

What’s Next for Home Prices in 2025?

The majority of experts foresee a steady climb in home values at a more balanced pace compared to recent years.

• Top Optimists: AEI Housing Center leads the way with a bold 5.5% appreciation forecast, followed by Wells Fargo at 4.9% and Bank of America at 4.7%.

• The Moderates: Most projections hover between 2-4%, reflecting a healthier growth rate that benefits both buyers and sellers.

• Outlier Alert: Moody’s Analytics predicts a slight dip at -0.4%, standing as the only bear in the group.

But here’s the catch: home prices vary by market. What happens nationally might not reflect exactly what’s happening in your area.

• Markets with More Inventory: Prices could grow more slowly or even decline slightly.

• Tight Inventory Areas: Prices are likely to keep climbing – and that’s what’s happening in most of the country.

This highlights why it’s crucial to work with a local real estate expert who understands your market. A trusted professional can provide insights into what’s happening in your area and guide you toward smart decisions, whether you’re buying or selling!

How Did We Get Here?

For over 15 years, homebuilders haven't been able to keep up with demand due to various factors, including the 2008 housing crisis, which significantly slowed home construction. While there has been some progress in recent years, builders are still playing catch-up, and according to AmericanProgress.org, they are not even close to meeting current demand, let alone making up for years of underbuilding.

As long as there is a housing shortage, home prices will either remain steady or continue to rise in most areas.

What About Next Year?

Most experts predict that home prices will continue to rise in the coming year, but at a slower, healthier pace. However, it's important to note that home prices vary by location. What happens at the national level may not necessarily reflect your local market. If your area has more homes for sale, prices could grow more slowly or even see slight declines. But in areas like Sacramento, where inventory is still limited, home prices are likely to keep climbing.

As a lifelong resident of Sacramento, I understand our local market and can help you navigate it. Working with a local real estate expert, like myself at Sacramento Platinum Realty, ensures you’re equipped with the knowledge to make informed decisions based on the conditions specific to our area.

Why Choose Sacramento Platinum Realty?

If you're wondering what it will take for home prices to come down, it all comes down to supply and demand. With inventory still limited in most markets, including Sacramento, prices are likely to stay steady or continue to rise.

That’s where Sac Platinum Realty comes in. As a lifelong resident of Sacramento, I have a deep understanding of our local market, and our team is committed to helping you navigate these conditions. We provide expert guidance to ensure you’re making informed decisions, whether you’re buying or selling a home.

At Sac Platinum Realty, we are dedicated to delivering personalized service, market insights, and the local expertise you need to achieve your real estate goals. Let’s connect and create a plan that works for you!