US home prices could fall by as much as 20% next year

her housing prices It fell during the second half of 2022 With demand for residential property waning in a number of cities across the United States, prices could continue to fall by as much as 20% next year as mortgage rates rise and the housing market returns to normal in the wake of the pandemic, according to a prominent Wall Street economist. . .

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a report last week that the decline in home demand amid Sharp rise in mortgage rates It weighs on housing prices.

“[W]We expect home sales to continue declining until early next year. By this point, sales will have fallen to an uncompressible minimum, as the only people moving home are those who have no choice due to work or family circumstances. [basis point] An increase in rates over the past year.”

Economists at Goldman Sachs said they expect home prices to fall 5% to 10% next year.

Cities that experienced the most steep home price hikes in the past year are now seeing these homes return to the ground, including places like Austin, Texas; Phoenix, Arizona; Salt Lake City, Utah; and Denver, Colorado.

Home sales fell to 4.7 million last month, down 1.5% from August, according to the National Association of Realtors.

Higher interest rates could further tighten supply

Mortgage rates have more than doubled this year. The average 30-year typical mortgage rate rose this week to 6.94% from 6.92% last week and 3.2% in January. The average fixed-rate mortgage rate for 15 years is now 6.23%, compared to 2.33% a year ago.

Rising prices have forced some homeowners to put pressure on selling their properties because they will have to take out a mortgage to buy another home as prices rise.

“It is entirely possible that even people who want to trade will face larger monthly payments,” Shepherdson said. “That’s a good reason to stay, and therefore restrict the show.”

The inventory of unsold existing homes fell for the second straight month in September to 1.25 million, according to NAR data.

Shepherdson predicted that the supply of homes available for sale next year will shrink, noting that “prices must fall significantly in order to restore equilibrium.”

NAR said the median home sale price rose to $384,800 in September, up 8.4% from a year ago.

“We believe inventory could rise slightly in the next month or two as homes stay on the market for longer, but new listings continue to fall as sellers dip to the sidelines,” Nancy Vanden Houten, chief US economist at Oxford Economics, said in a statement. Research note.

How high will rates go?

Economists expect mortgage rates to continue rising next year as the Federal Reserve raises borrowing costs in an effort to curb inflation. Rates could reach 8.5% “which would be another big shock to the housing market,” NAR’s chief economist, Lawrence Yun told a group of real estate investors last week. Other analysts believe mortgage rates may reach double digits.


Rising Mortgage Rates Calm US Housing Market

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Whalen Global Advisors said it expects interest rates to hit double digits by April 2023. Mortgage rates haven’t reached those levels since 1989, when they were 10.25%. The highest mortgage rate in US history was 16.64% in October 1981.

Mortgage rates have risen about 3.8% since the end of 2021, according to Oxford Economics. Wall Street analysts expect the Fed to raise the benchmark interest rate by as much as 1.5% by the end of the year.

“At the start of the year, mortgage rates seemed unlikely to exceed 6%,” Lisa Sturtevant, chief economist at Bright MLS, told Realtor. “The question now is how high will it go? A lot of the answers depend on how seriously the Fed raises rates in its next two meetings.”

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