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These 49 housing markets saw home prices fall by more than 15%—this interactive map shows Moody’s updated forecasts for 322 markets



One historic mortgage interest rate shock-with 30-year average fixed mortgage rate increased from 3% to 6% this year—after the housing boom caused by the pandemic US home prices increased by 41.3% in just over two years has simply pushed many who would buy to their breakout point. Other borrowers, who had to meet the lender’s strict debt-to-income ratio, had completely lost their mortgage eligibility. What is that historic squeeze, derived from prices and interest rates? Luck called “affordability under pressure.”

Currently, affordability pressure has seen home prices in the US, measured in Case-Shiller national house price indexfell on a seasonally adjusted basis for the first time since 2012. In total, US home prices fell 2.2% between June 2022 and September 2022. That’s concerning. second largest home price adjustment after World War II.

Whenever a publication like Luck say “U.S. house prices,” we’re talking about the national aggregate. Whatever happens next in the U.S. housing market is bound to vary by market, price level, and home type.

To get an idea of ​​what maybe come next, Luck again contact Moody’s Analytics for their updated home price forecasts (see map below) for the nation’s 322 largest housing markets. (This is their previous subway forecast).

Here’s what the data says.

Back in May, Moody’s Analytics chief economist Mark Zandi said Luck that the Federal Reserve’s inflationary war will saw the US housing market fall into a “housing adjustment”. At the time, he expected home prices to be flat across the country and fall somewhere between 5% to 10% in “overvalued” markets.

Zandi, of course, was right about home repair. That adjustment was really sharp to the point Moody’s Analytics in October once again downgraded its nationwide home price outlook. From peak to trough, Zandi predicts a 10% drop in home prices in the US. If a recession emerges, that outlook drops to a 20% peak-to-trough drop.

“There is no change in our outlook for [national] home price or mortgage rate. I feel more confident that the economy will be able to avoid a full-blown recession next year, in line with a 10% peak-to-trough drop in home prices nationally,” Zandi said. Luck on Friday. By spring 2023, he predicts mortgage rates will hover around 6.5%.

While Zandi predicts top-to-bottom house prices will fall by about 10% nationally, he expects it to vary by region. In markets like Morristown, Tenn. and Muskegon, Mich., Moody’s Analytics predicts house prices will fall by 24.1% and 23.3%, respectively. The company predicts markets like New York and Chicago will fall 6.3% and 4.2%, respectively, from peak to trough.

Moving forward, Moody’s Analytics expects “significantly overvalued” housing market to see the steepest decline. (You can find Moody’s market-by-market overvaluation study.) here).

Look no further than markets like Boise and Flagstaff, Ariz. Just weeks after the pandemic, those markets were flooded with buyer interest from office professionals working in high-cost cities like Seattle and San Francisco. While remote work is a game changer for rootless white-collar workers, it doesn’t fundamentally change the incomes of locals. So when the boom broke out, Boise and Flagstaff are “overvalued” 76.9% and 65.6%.

Fast forward to 2022 and diminishing levels of migration mean that those urban sprawl must rely more heavily on local income. That will be difficult to do, Zandi said. And for that reason, Moody’s forecast model expects home prices in markets like Boise and Flagstaff to drop more than 20% from peak to trough.

While speaking at a Brookings Institution event on Tuesday, Fed Chairman Jerome Powell indicates the increase in house prices over time The housing boom caused by the pandemic qualifies as a “housing bubble”.

“Out of the pandemic, [mortgage] rates are very low, people want to buy a house, they want to get out of the city and buy a house in the suburbs because of COVID. So you really had a housing bubble, you had housing prices go up [at] Powell said.

The The housing boom caused by the pandemic has indeed seen housing fundamentals spiral out of control. According to Moody’s Analytics, the median U.S. housing market was “overvalued” by 1% in Q2 2019. As of Q2 2022, the median U.S. housing market was “overvalued.” “about 25%.

Moving forward, Zandi doesn’t expect a financial meltdown or 2008-style foreclosure crisis, but he does expect housing fundamentals to return to averages. Some of that regulation will come from rising incomes, some from falling house prices.

“Before [home] prices started to fall, we were overvalued [nationally] about 25%. Now this means [home] prices will normalize. Ability to pay will be restored. The [housing] the market won’t be overvalued after this process is over,” says Zandi. “It’s all about affordability. First-time buyers are locked out of the market. They simply cannot afford the mortgage payments. Exchange buyers won’t sell and buy because it doesn’t make economic sense.”

Of course, the house price adjustment has come.

Just over half of the country’s 400 largest housing markets saw local home valuesmeasured in zillow, falling off their 2022 high. The average drop is -2%.

The ongoing correction has hit hardest hit two different types of markets: the high-cost West Coast markets and boomtowns “boiling”.

Even before the sharp correction, John Burns Real Estate Consulting said Luck that high-cost West Coast markets are at greater risk of falling in value. The reason is simply that they are more sensitive to scale. Markets like Seattle (down 6.3%) and Portland, Ore. (down 5.1%) has a double impact: Not only is their luxury real estate market more sensitive to interest rates, but so is their tech sector. There is also the fact that homebuilders and iBuyers—who are most likely to drop in price during the adjustment period—creating a higher concentration of inventory in the West.

Other market groups that are heavily affected by the correction are vibrant market. These markets, including the likes of Austin (down 10.2%) and Boise (down 7.1%), saw their home values ​​decouple from the fundamentals (ie. is local income) during the boom. And now, they are seeing sharper retracements.

Want to be updated on housing correction? follow me on Twitter in @NewsLambert.

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