Home price adjustment is increasing — what will happen from the US housing market in 2023
Of course, that’s what we’re seeing now. Despite favorable demographics and tight inventory levels, affordability is under pressure—Mortgage interest rates spike along with sky-high house prices – are starting to push home prices lower. In fact, this week we learned that home prices in the United States are measured in Case-Shiller US National Home Price Index announced a decrease from the first month since 2012.
Across the country, the U.S. housing market — has been priced in to 3% mortgage rates for a time The pandemic housing boom—Towards equilibrium in the face of 6% mortgage rates. But we are still in the early stages. And house price correction is taking place yet to roll out to all markets: May-August San Jose home values fell 10.6% while home values increased 2% in Orlando.
To better understand the place US housing downturn next — and if the home price adjustment will hit more markets soon—Luck contacted Zonda’s chief economist Ali Wolf. When she’s not traveling around the country talking to family builders, she advise the White House on housing matters.
Below is LuckQ&A of Ali wolf.
Luck: When the data arrives, It’s clear that home prices are falling in many markets across the country. In some places, it is quite sharp. Do you predict house prices will continue to fall in 2023?
Wolf: We haven’t seen home prices fall nationally yet, but there are a number of markets where home prices are starting to go down and we expect to see that in more cities across the country over the next few months. House prices could be adjusted in 2023 as long as interest rates remain elevated and consumer demand remains sluggish.
What type of market is most vulnerable?
The most vulnerable markets include: 1) Those where home prices surged due to jobs combined, such as Boise, Las Vegas and Denver. 2) Markets that don’t have a local job base to support higher home prices (in other words, markets where home prices and incomes are not high), like Nashville and parts of Florida. 3) Markets where housing stocks have grown rapidly, like Phoenix and Austin.
Why markets like Austin, Boise, and Phoenix change so fast?
The housing boom in markets like Austin, Boise, and Phoenix was among the nation’s earliest and most pronounced. Record-low mortgage rates combined with lifestyle changes caused by the pandemic, including work-from-home and increased relocation, have caused housing demand to surge and supply unable to keep up.
People moving from places like California and Washington can tap home equity from selling in higher-cost markets and channel that money into buying a new home in relatively more affordable markets. this. Relocating buyers find these markets to be very affordable relative to where they moved, to the detriment of local buyers.
These markets have the belief that the imbalance of supply and demand has been so severe and long-lived that the market can never get too hot. Buyers, frantic to secure a home, are willing to pay almost any price to get a home. Investors and early adopters consider these markets ripe for opportunity. This sentiment has contributed to the sharp increase in house prices.
However, as interest rates rise in early 2022, reality begins to emerge. Home price growth is slowing and not every home listed is selling for more than the list price within a day of going online. Demand for housing slows as some new homes under construction begin to appear online and inventories of existing homes grow rapidly as sellers try to align what they consider to be the top of the market. .
How do you expect? Mortgage rates near 7% to impact housing market? We did adjusted for a 5% mortgage rate. Should we expect things to go up by 6.5%-7%?
Housing affordability is driven by many factors, but the two main inputs are home prices and mortgage rates. We just went through a unique period in US history where soaring home prices were offset by record low interest rates. Cheap financing has helped keep monthly mortgage payments under control.
However, interest rates have risen significantly since the start of the year, putting pressure on housing affordability. Buyers have begun to be bid out of the market as interest rates move from 3% to 4%, and every 100 basis point increase continues to push millions of Americans out of home ownership.
If mortgage rates remain elevated for an extended period of time, we expect housing demand to remain low, new home construction will be limited and home prices will need to be adjusted downwards across the country.
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