Over the course of 2022, hopeful homebuyers found themselves up against increasingly high interest rates — By October, January’s low 3.4 percent rate for a 30-year mortgage had skyrocketed up above 7 percent. Combined with rock-bottom inventory deficits, homeownership moved out of reach for many people. That was particularly true for first-time buyers, who saw monthly mortgage payments on a typical starter home balloon by 49 percent in just one year, according to the National Association of Realtors (NAR).

Making matters worse, up until February 2023, the median price for an existing home in the U.S. had increased year-over-year for more than a decade  — a NAR record. As of June 2023, the median home price was $410,200, just a few thousand dollars shy of NAR’s all-time high. Will home prices ever come back down to earth? Housing market experts don’t expect things to change significantly anytime soon.

If you’re hoping to buy a house this year, the prices you see will depend on a multitude of factors, including your location and the Federal Reserve’s rate moves for the rest of the year. Here’s a deeper look.

What drives housing prices?

Many factors affect home prices, but some weigh more heavily than others. These are some of the major variables most likely to drive housing prices:

  • Mortgage rates: The interest rate on a home loan can drastically sway the long-term price of ownership. As of late July, the average interest rate on a 30-year fixed rate loan was 6.98 percent. The higher monthly payments that result mean less purchasing power for buyers, which in turn means fewer people that can afford a home. (For example, according to Bankrate’s mortgage calculator, a $320,000 30-year mortgage at a 5 percent interest rate results in monthly principal and interest payments of $1,717. The same loan at 7 percent brings those payments to $2,128.)
  • Available inventory: When there is high buyer demand but few options on the market to meet it, as has been the case for some time now, sellers can get away with asking higher prices. However, the pandemic’s raging seller’s market has started tilting back into balance in many areas. In addition, Realtor.com’s Monthly Housing Report for June shows that the number of homes for sale has increased about 7 percent compared to last year.
  • Inflation: Inflation has eased considerably, which is obviously good news for consumers. However, the declining inflation rate is not driving down housing prices: In fact, the shelter category drove 70 percent of the overall increase in the U.S. Bureau of Labor Statistics’s Consumer Price Index for June. Homebuyers are still feeling the financial crunch.
  • Local market conditions: In the end, real estate is a very local industry, and prices can soar sky-high in one location while at the same time plummeting in another. The local job market, housing stock and overall cost of living all play large roles in each market’s housing prices.

Are home prices dropping?

Historically, home prices tend to rise over time, not fall. Prices are currently coming down in some markets, though — however, in many areas where prices are falling, the declines have not significantly improved affordability. Take notoriously expensive San Francisco, for example. According to data from the California Association of Realtors, single-family home prices in San Francisco fell more than 16 percent between June 2022 and June 2023. But despite that double-digit drop, the median price was still over $1.5 million — lower than before, yes, but still well out of reach for the average buyer.

Where are they dropping the most?

A July Redfin report found that home prices were down year-over-year in 20 metro areas across the country. Prices fell the most in the following metro areas:

City Percent price drop
Source: Redfin
Austin 8.8%
Detroit 6.4%
Phoenix 4.7%
Las Vegas 3.9%
Sacramento 3.8%

Should I buy a house now or wait?

Is today the day to put in an offer? Or should you put your home search on hold for now? While there isn’t a one-size-fits-all answer, there are a few things to consider when deciding whether you should buy a home now or pump the brakes.

1. Do you plan to stay put for a while?

Given the closing costs associated with buying a home, which can run up to 5 percent of the purchase price, it doesn’t usually make sense to buy a home if you won’t live there long enough to recoup those costs. There are also tax implications to consider if you sell a home after only a short time.

2. What do mortgage rates and other economic trends look like?

Keep an eye on the fluctuation of mortgage rates. If you can lock in a relatively low rate — or one that fits within your budget, at least — it may be a good time to buy. You can always refinance later if rates go down. Consider the overall economy, too: Fears of a possible recession still loom large, and if your employment situation is not completely stable, it might be smarter to hold off.

3. How much inventory is available near you?

The fewer homes that are available on the market, the hotter the competition will be for them. When buyers don’t have a lot to choose from, sellers have the upper hand — and prices tend to rise. Inventory is still low across most of the country, which contributes to prices remaining high. If you live in a market where competition is still fierce, you may want to wait for things to balance out a bit more.

Next steps for hopeful buyers

  • Do an honest analysis of your personal finances before you decide whether the time is right to buy a home. How much do you have in savings? How much other debt do you have, like student loans or car payments? What’s your credit score? Buyers with less-than-stellar credit won’t be able to take advantage of the best available rates. It may be smart to take some time to improve your credit score and pay down your existing debt before you commit to becoming a homeowner.
  • Consider putting the money you’re saving for a down payment fund into a high-yield savings account while you wait. When you’re ready, Bankrate’s new-home calculator can help you crunch the numbers to figure out how much you can comfortably afford.
  • When it’s time to start house-hunting, be sure to get preapproved for a mortgage first. Preapproval helps you budget by giving you a solid idea of how much a lender will be willing to loan you. It also shows sellers that you’re a serious, qualified buyer, which is extra-helpful in competitive markets.
  • Then, consult with an experienced local real estate agent to learn more about the market in your area. An agent will be able to point you toward listings that meet your needs and your budget, and will guide you through every step of the homebuying process with professional expertise.


  • No — on the whole, U.S. prices are actually on the rise. According to the National Association of Realtors, the median home price in June was $410,200, which is very close to an all-time high.
  • Experts do not thing a housing crash is imminent. Though prices are dropping in some markets, the continued shortage of available inventory means that there’s not enough housing supply to meet demand, which helps to keep prices high. Other reasons the housing market will stay relatively stable include a lack of new construction and strict lending standards from mortgage providers.
  • High mortgage rates and high prices have so far made 2023 a tough year for homebuyers. While experts do not expect either one to rise drastically over the remainder of the year, they do not expect significant declines either. If you have excellent credit and your finances are strong enough to afford the monthly payments, you can always buy now and refinance later. But if your credit is not great, you don’t have enough in savings or your income is not stable enough to outlast a possible recession, it might be smarter to wait.