At least that's according to Moody's Analytics chief economist Mark Zandi. If home prices do indeed fall on a national basis, it would likely translate into much deeper price cuts in some regional housing markets.
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House prices will also decline as affordability constraints bite, but tight markets and a lack of forced sellers means we expect the drop to be relatively modest, with annual growth falling to -5% by mid-2023," wrote Capital Economics in its latest outlook. That will cut home sales, with existing sales ending 2022 more than 20% down from their end-2021 level. As a result, mortgage payments as a share of income will exceed the peak seen in the mid-2000s. "Mortgage rates are rising and will reach 6.5% by mid-2023. Year-over-year home-price declines are incredibly rare: They have only happened twice (see below) over the past half century. Historically speaking, that's a bold prediction. Over the coming year, Capital Economics predicts home prices will fall 5%. Zillow and Capital Economics don't see eye to eye. housing market returned to a period of normalized growth. If any of those three forecasts come to fruition, it would mean the U.S. home price growth of 3.1% and 3.2%, respectively. In 2023, the Mortgage Bankers Association and Fannie Mae forecast U.S. Over the coming year, CoreLogic predicts U.S. Zillow is clearly the only housing bull left. Over just four months, Zillow has slashed its price growth outlook by 8.1 percentage points.
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Just four months ago, Zillow was predicting year-over-year home price growth would hit 17.8% next year. Zillow remains relatively bullish, however, we should point out this forecast also represents a huge downward revision. This deceleration is a clear signal that buyers are dialing back their demand for homes in the face of daunting affordability challenges," wrote Zillow economists in their latest outlook. "The trend appears to show that the market passed an inflection point for home values between April and May, transitioning from ever-hotter to somewhat-cooler price growth. After all, that would still be double the average annual home price appreciation (4.4%) posted since 1987. While that would mark a significant deceleration from the 20.4% posted over the past year, it would hardly be a relief for buyers. Between May 2022 and May 2023, Zillow predicts U.S. That said, the industry is split on where this declaration will take us. home prices? To find out, Fortune examined revised housing forecasts published by Capital Economics, Mortgage Bankers Association, Fannie Mae, CoreLogic, Moody's Analytics, and Zillow. What does this "housing correction" mean for U.S. Some borrowers-who must meet lenders' strict debt-to-income ratios-have lost their mortgage eligibility altogether. Those higher mortgage rates mean that homebuyers are finally feeling the full-brunt of record home price appreciation.
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housing market-which has seen home prices spike 39.8% since March 2020-into a full-blown housing correction. This swift move-up in mortgage rates has pushed the U.S. As a result, financial markets pushed up the average 30-year fixed mortgage rate from 3.1% to 5.7% over the past six months.Ĭentral bankers knew what they were doing. This year, the Fed transitioned to bond selling (i.e. That saw financial markets push mortgage rates to historic lows. During the early weeks of the pandemic, the Fed kicked off an unprecedented bond buying spree (i.e. The Fed doesn't set mortgage rates, however, it has the levers available to put upward or downward pressure on mortgage rates. That's why the Federal Reserve pulled the housing e-brake: mortgage rates. In the eyes of the Fed, it's time to stop that Pandemic Housing Boom. Of course, an elevated builder demand for steel, lumber, and refrigerators only put further stress on an already maxed out global supply chain. It also saw builders push homebuilding to levels not seen since 2006. Soaring home prices gave landlords an opening to jack up rents. It translated into fierce bidding wars and double-digit home price growth. Elevated homebuyer demand during the pandemic simply overwhelmed inventory. There's no doubt about it: The Pandemic Housing Boom was an inflationary engine.