U.S. housing market sees second-biggest correction in post-World War II period — when to expect home prices to bottom

Homebuilders and economists both see the housing bubble of the 2000s forming – they don’t think it will burst. Their reasoning was that at the time, house prices hadn’t really fallen since the Great Recession.

“I think people who converted from 1946 to 2008, when house prices were always going up, died. My parents believe it’s really unthinkable for [home] reduced price, ” Redfin CEO Glenn Kelman told Luck.

That “religion” of course collapsed after the bursting of the housing bubble caused home prices in the US to drop a staggering 27% between 2006 and 2012. Knowing that home prices can actually fall, Kelman said, is that why builders and flippers start to drop in price faster than this. Period. When the market movesthey want to get out first.

“People [are] reply [in 2022] Kelman said.

Since August, Case-Shiller stat is lagging shows that US home prices have fallen 1.3% from their June 2022 peak. That marks the first decline since 2012. It is also likely to be far below the actual decline. . Just look at the 7.6% drop in US home equity in the third quarter, reported on Friday by black Knight. That was the largest home equity decline ($1.3 trillion) ever recorded and the largest percentage drop since 2009.

How far will house prices fall? It depends on who you ask.

Researchers at Goldman Sachs Expect US home prices to fall from 5% to 10% from top to bottom — with Their official forecast model predicts a 7.6% drop. If it materializes, it will surpass the 2.2% decline from May 1990 to April 1991. That would make this ongoing correction the second-largest home price decline in the period. post-World War II period.

“Economists at Goldman Sachs Research say there are risks that the housing market could decline more than their models suggest… based on signals from house price momentum and affordability. House,” Goldman Sachs writes on its website.

That said, it may take some time for house prices to bottom out. In fact, the Goldman Sachs model estimates US home prices won’t reach that level until March 2024.

Researchers at Moody’s The analytical figures tend to be slightly more bearish.

US home price forecast to drop 10% from peak to troughwith prices bottoming out by the end of 2025. However, should a recession occur, Moody’s Analytics would expect a larger peak-to-trough decline of 15% to 20%.

Of course, when the groups say “U.S. home prices,” they’re talking about the national aggregate. Across the region, the researchers acknowledge that house price variability varies significantly by market. In vibrant market Like Boise and Nashville, Moody’s forecasts a decline of about 20%. Meanwhile, in Chicago, a relatively tame market during the boom, home prices are expected to fall below 3.6%. (You can find their forecasts for 322 markets here).

Why did house prices start to rise? What does it boil? Luck call affordability pressure. Mortgage rates soar along with a historic 43% increase in home prices in the US during The pandemic housing boom simply set monthly payments beyond what many borrowers can afford.

When all is said and done, Moody’s Analytics chief economist Mark Zandi thinks this ongoing housing adjustment will boost national housing fundamentals back in line with historical standards.

“Before the price started to fall, we were overpriced [nationally] about 25%. Now, this means the price will normalize. Ability to pay will be restored. The [housing] Zandi said.

Want to stay updated home repair? Follow me on Twitter in @NewsLambert.

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