Is average home price headed for $500,000? One housing expert thinks so

The median U.S. home price could hit $500,000—a 20% increase from today's prices, one housing expert warns.

Since 2019, home prices have surged over a third from $313,000 to the current median of $418,000. According to Bill Pulte, CEO of the private equity firm Pulte Capital, the boom may not be over yet.

“I predict if rates go down, housing prices will go through the roof,” said Bill Pulte, CEO of the private equity firm Pulte Capital. “You could see those home prices go up, in my opinion, 5, 10, 20%.”.

If Pulte's prediction comes to pass, he fears homebuyers could face a “two-pronged problem” of rising house prices and an increased demand for homes.

“Even when inflation does come down on a consistent basis, it doesn’t mean prices falling; it just means prices not rising as fast,” said Greg McBride, Bankrate’s chief financial analyst.

Interest rate balancing act

Inflation has been on a steady climb since the onset of the pandemic, peaking at 9% in the summer of 2022 and leading the Fed to increase rates from near-zero to over 5%.

In response to rising federal fund rates, the 30-year fixed rate jumped from around 3% at the end of 2021 to nearly 8% in October 2023. The average current 30-year rate stands at 7.43%.

“If rates go down just another percentage point — that’s what I’m hoping for by year-end — prices are going to go through the roof,” said Barbara Corcoran, founder of the Corcoran Group and ‘Shark Tank’ investor.

”Everyone’s going to charge the market. And so if you wait for interest rates to come down another point, I don’t think you’ll gain, I think you’ll wind up paying more.”

All eyes on the Fed

The Fed is set to meet again next week to discuss interest rate cuts, but economists don’t expect the central bank to move rates lower right now.

“I highly doubt we’re going to get a rate cut just yet,” said Joseph Camberato, CEO at NationalBusinessCapital.com. “I really believe we’re finally headed in the right direction, albeit very slowly.”

The Fed was expected to cut rates by mid-2024, but after the unexpected resurgence, inflation currently stands at 3.5%—higher than the central bank’s stated target of 2%.

The central bank left rates unchanged at its last meeting in May and economists now expect two rate cuts beginning in September.