In the post-pandemic era, surging inflation made finding a low mortgage rate impossible as the Federal Reserve raised the benchmark interest rate and lenders followed suit, pushing up the cost of home loans. While rates had been hovering around 4% or below since the Great Recession, they soared to the highest level in decades, at points averaging upwards of 7.00%. 

Home prices also hit new highs, with costs climbing due to high demand and limited supply. 

Thankfully for would-be homebuyers, mortgage rates began to fall in the leadup to the Fed’s September meeting as the Federal Reserve forecasted rate cuts and followed through by reducing rates by 50 basis points. Average mortgage rates declined by over a point, opening up the door to refinances and making it possible for some borrowers to find affordable home loans.

Now, some experts are warning borrowers not to wait for rates to fall further. Still, many are hesitant to jump in, in part because the Fed is signaling further rate cuts into 2025 and in part because of concern about the hot housing market and the potential for future price declines.

Since December is normally a slow time for real estate, the big question now is whether prices will fall this month and present a buying opportunity that should force buyers off the sidelines, or whether high costs are here to stay through 2025.

Start by seeing what mortgage interest rate you could qualify for here.

Will home prices fall this December?

The good news for those coping with a tough housing market is that December could provide some relief from high prices — but there are no guarantees.

“In December, the housing market usually slows down, with fewer new listings and some properties seeing price adjustments or being temporarily pulled off the market for the holidays,” explains Rashi Malhotra, an agent with Coldwell Banker Warburg. “This often leads to a modest dip in prices.”

Broker Jennifer Roberts of Coldwell Banker Warburg agrees, saying this is a time of year when “potential buyers typically put their home search on hold unless there is something to entice them, and that comes in the form of a significant price drop.”

However, Malhotra warns this price decrease may not occur this year based on current trends. “The new inventory coming to the market right now is competitively priced. Not lower, but aligned with current market conditions,” she says. 

John Walkup, Co-Founder of UrbanDigs also confirms that 2024 may buck the trend. “With consumers still in spending mode and mortgages slowly coming back down, it looks like December may see more robust activity than would have been expected a year ago.”

Roberts also notes that a lower list price doesn’t necessarily translate into a lower final sale price. “I’ve seen more than one situation where an apartment has sat on the market, and once the owner dropped the price in December, they received more than one offer, and it turned into a bidding war,” Roberts warns.

Consider a mortgage pre-approval now to get ahead of any price changes.

Some sellers may hold on price drops (or pull their listings)

For some sellers, the slow-down in activity during December is actually justification not to reduce their price, rather than motivation to offer buyers a deal.

“Sellers know that buyers are focused on the holidays and holiday travel in December, so it is not a good time to reduce prices,” says agent Kate Wollman-Mahan of Coldwell Banker Warburg. “Reduced pricing makes its greatest impact when buyers take notice. It brings additional eyes to a listing and should be done at an opportune time when buyers are focused on the market and not on hotel reservations and buying gifts.” 

Unfavorable conditions may even cause some sellers to temporarily pull their properties off the market entirely this month. This can make the remaining houses even harder to afford

“It’s common to see potential sellers take their homes off the market around the holidays because they don’t want to worry about showings during this period,” explains Darren Tooley, senior loan officer at Cornerstone Financial Services. “This shrinks the inventory, potentially causing prices to go up.” 

Supply and demand issues may keep prices high

It’s also important to remember that the current housing market has been shaped by unusual forces, including record-low rates during the pandemic that led to an influx of buyers at the same time as new construction was sharply curtailed.

“The housing market still has a problem with supply and demand, ” explains Domenick D’Andrea, AIF, CRC, CPFA, financial advisor, and Co-Founder of DanDarah Wealth Management. “With demand still far outweighing the supply, houses will potentially continue to be sold over the asking price.”

D’Andrea also warned that many people are reluctant to list their property now because doing so would mean giving up a loan that’s more affordable than the rate they could get if they borrowed to buy a new property today. 

“Sellers aren’t motivated to sell as they still need to live somewhere and most likely have a much lower mortgage interest rate than the current rates,” D’Andrea said. “I don’t believe in the current environment that we will see prices falling at all in the near future.” 

Tooley also agrees that a price decline isn’t likely, stating, “most indexes project home values to go up anywhere from 2 to 4% in their 2025 year-end forecasts.” 

The good news is that some of this could depend on where you live. “While the average US home will likely see its price tick up, local context is everything,” Walkup says. “Continued strength in the Northeast will be balanced out by potential softness in the overbought Sun Belt markets.” 

Ultimately, waiting for either home prices or interest rates to decline could leave borrowers sitting on the sideline for months or even years, missing the chance of building equity the entire time. Rather than delaying and hoping for falling rates or prices that may not come, or that may not have the anticipated effect on affordability, it’s best to improve your finances, get in a position to buy and make an offer on a home that you can comfortably pay to make your own. 

Get started here today.