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Housing Market: When will US home prices fall? 2023.This is the reason

Now that mortgage rates have skyrocketed to the 6% threshold, global research firms say US home price increases could fall next year, not this year.

In a post published on Monday, Capital economics In the US housing market, home price increases are projected to fall by 5% by mid-2023. Then, by the end of 2024, it will “gradually recover” to a 3% annual price increase.

This is an important analysis The U.S. housing market is starting to changeWhen interest rates on mortgages rise, potential homebuyers will bid or turn them off.But at the same time, the company has a dramatic “price plunge” The collapse of the housing bubble like in 2006That led to the global financial crisis and the Great Recession.

A 5% drop is certainly a price drop, but it doesn’t put home prices in a spiral of death.

Keep in mind that home prices have been steadily rising over the years and have dramatically accelerated during the COVID-19 pandemic. Price declines are important, but in a larger context it is a relatively small decline.

According to the company, the average selling price of single-family homes in the United States as of the first quarter of 2022 was $ 428,700. Analysis of census data by the Federal Reserve Bank of St. Louis.. This is a steep slope of over $ 100,000 from just two years ago, when the median US selling price in 2020 was $ 322,600.

what’s happening: Earlier, Capital Economics stated that mortgage rates above 6% would be “a threshold at which home prices are more likely to fall.” As interest rates reached that threshold, the company revised its home price forecast.

  • Matthew Pointon, Senior Property Economist at Capital Economics, said: “Currently, we expect annual home price growth to drop to -5% by mid-2023 and then gradually recover to 3% by the end of 2024.”

Mr. Pointon said Capital Economics had previously argued that the United States would “avoid a complete fall in home prices.” After all, most borrowers are protected by fixed-rate mortgages, the level of mortgages is high, credit is tight over the last two years, and the unemployment rate is unlikely to rise significantly. ”

For these reasons, forced home sales are unlikely — and it “will keep the market relatively tight and support home prices,” Pointon writes.

However, “we argued that mortgage rates above 6% put pressure on home prices,” Pointon said. In addition to the Fed’s fight against inflation, which has led to aggressive borrowing rate hikes, it has led to increased pressure on buyers, many of which have simply been reduced.

  • “Today, households with a median income trying to buy an average-priced home must spend nearly 25% of their income on mortgage payments, a predecessor seen in the mid-2000s. It’s higher than the record of 24%, “Written Pointon.

Until the 2006 housing bubble, the US housing market created a total demand for housing, allowing many to buy homes that they couldn’t afford to keep, very risky bank lending. It was greatly supported by practice. According to experts, there is no similar situation in today’s market.

Mortgage rates Coupled with record home prices across the country, it is now very high, Homebuyers who wish to buy are simply locked out.. The average interest rate on Tuesday’s 30-year fixed mortgage was 6.01%. Bankrate.com..

  • “There are no signs that lenders are actively set to relax lending standards, and the deterioration of affordability will keep many potential buyers out of the market,” Pointon wrote.
  • “And for those who are still in a position to buy a home, a surge in mortgage rates means that many have to cut their budgets,” Pointon said. “It will reduce competition for homes, and sellers will eventually see the need to accept lower prices for their property.

2023 Housing Market Forecast: Capital Economic predicts that mortgage rates will rise to 6.5% towards 2023.

“Assuming that rising home prices follow previous forecasts and slow to zero by mid-2023, interest rate profiles show that mortgage payments will peak in the mid-2000s by mid-2023,” wrote Pointon. I am.

“House prices are set to fall because it looks unsustainable. However, the previous point about the shortage of compulsory sellers remains. Therefore, lower housing demand will cause home prices to fall. We expect it to be relatively small and the annual growth rate to drop to -5% (year-on-year) by mid-2023, “Pointon added. “It will bring mortgage payments below mid-2000s levels by early 2023.”

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https://www./u-s-world/2022/6/21/23177375/housing-market-us-home-prices-will-fall-2023-mortgage-rate-capital-economics-predicts Housing Market: When will US home prices fall? 2023.This is the reason

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