home prices crashDemand for residential real estate has cooled in many U.S. cities According to the famous Wall Street, prices will fall by up to 20% next year as mortgage rates rise and the housing market normalizes in the wake of the pandemic. The Economist may continue to do so.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a report last week that demand for housing is plummeting amid a downturn.It weighs heavily on housing prices.
“[W]Home sales are expected to continue to decline through early next year. By that point, sales will have shrunk to an incompressible minimum where only those who have no choice but to go home due to work or family circumstances,” he said. [basis point] Prices have increased over the past year. ”
An economist at Goldman Sachs Predict House prices will fall moderately by 5% to 10% next year.
Cities like Austin, Texas, are coming back to Earth again in the cities that saw the steepest rises in home prices last year. Phoenix, Arizona. Salt Lake City, Utah. and Denver, Colorado.
home sales 4.7 million Last month was down 1.5% from August, according to the National Association of Realtors (NAR).
Rising interest rates could further tighten supply
Mortgage interest rates have more than doubled this year. The average interest rate on a typical 30-year mortgage rose to 6.94% from 3.2% this past January. The average interest rate for a 15-year fixed-rate mortgage is now 6.23%, compared to 2.33% a year ago.
Gregory Daco, chief economist at EY-Parthenon, said: “Rising interest rates and rising home prices are making home prices out of reach for many potential buyers.” Growth will continue to decelerate rapidly and will contract significantly next year.”
Rising interest rates have forced some home sellers to put the brakes on selling property as interest rates are soaring and they will have to take out a mortgage to buy another home. I was.
“Even for those who want to trade-in, there’s a good chance their monthly payment will increase,” Shepardson said. “This is a valid reason for maintaining the status quo, which curbs supply,” he said.
Unsold inventory of existing homes fell for the second straight month to 1.25 million units in September, according to NAR data.
Shepherdson predicted that the supply of available homes for sale is likely to shrink next year, noting that “price will need to drop significantly to restore equilibrium.”
Nancy Vanden Houten, chief U.S. economist at Oxford Economics, said: “We expect inventories to rise slightly over the next month or two as homes stay in the market longer, but sellers recede to the sidelines. Therefore, the new list continues to decline,” said a research note.
The median home sale price rose to $384,800 in September, up 8.4% from a year ago, according to the . NARLisa Sturtevant, chief economist at Bright MLS, said that figure could be higher or lower in some parts of the country.
“Even the September house price data may not capture what’s happening in the rapidly changing housing market,” Sturtevant said. ‘s purchasing power has fallen significantly, forcing sellers to reset their price expectations.”
How high will interest rates go?
Economists expect mortgage rates to continue rising next year as the Federal Reserve further raises borrowing costs to keep inflation in check. NAR chief economist Lawrence Yun told a group of real estate investors last week that interest rates could reach 8.5%. Other analysts predict that mortgage rates he could reach double digits.
Whalen Global Advisors said it expects rates to reach double digits by April 2023. Mortgage interest rates were 10.25% and he hasn’t reached that level since 1989. The highest mortgage rate in US history was 16.64% in October 1981.
Mortgage rates have risen nearly 3.8% since the end of 2021, according to Oxford Economics. Wall Street analysts expect the Fed hike to raise the benchmark rate by another 1.5% by the end of the year.
“At the beginning of the year, it seemed very unlikely that mortgage rates would rise above 6%. Said real estate magazine. “The question is how high rates will go. A lot of the answer will depend on how aggressively the Fed will raise rates at its next two meetings.” .