Will House Prices Decline Nationally in 2025?
Most forecasts for 2025 were for U.S. house prices to increase modestly in the 3% to 4% range. My early view was “mostly flat prices nationally in 2025” with some areas seeing price declines. I didn’t expect either a crash in prices or a surge in prices.
With inventory increasing, year-over-year (YoY) price growth has slowed nationally, and declining in many areas. The following table shows the YoY price slowdown. Note that the median price is impacted by the mix of homes sold.
The seasonally adjusted Case-Shiller National Index is essentially unchanged year-to-date (YTD). The index was at 327.81 in December 2024 and was at 327.90 in the April report.
And the Freddie Mac HPI SA is down slightly YTD. The index was at 299.29 in December, and is now at 297.69, a decline of 0.5%.
Other measures are also indicating a slowdown in the YoY growth, but not a collapse in prices. ICE reported this morning: Annual Home Price Growth Slowed to 1.3% in June
Annual home price growth slowed to 1.3% in June, from 1.6% in May, the slowest rate in two years
27 of the 100 largest U.S. markets saw annual price declines in June, a softness not seen since the immediate aftermath of the Fed’s initial rate increases in 2022
Home prices rose by a modest 0.03% in the month on a seasonally adjusted basis, the equivalent of a seasonally adjusted annualized rate (SAAR) of +0.36%, suggesting a propensity for further slowing
Based on the trend, the increase in inventory (and months-of-supply), it appears house prices will be unchanged or down slightly in 2025.
And that means real house prices (inflation adjusted) will be down this year. As of April, real house prices (based on the Case-Shiller National Index) are down 1.7% from the peak in 2022. Here is an updated graph I posted three years: House Price Declines: How Long for Real Prices to Recover?
The real return following the ‘79 peak was 6.5 years. It took 11 years for real prices to reach the previous peak following the peak in ‘89.
And it took 14.5 years to return to the real peak reached during the housing bubble. It has now been 35 months since the real peak in house prices.
The key is it typically takes a long time for prices to return to the previous real price peak.