Some News makes people Happy

The home price correction intensifies 2023 housing market predictions


When the Federal Reserve starts trying to fight inflation, the U.S. housing market will be at risk. But the effects will be even worse when interest rates go up after home prices in the U.S. have gone up by 43% in just over two years.

We are, of course, seeing that now. Even though the demographics are good and there aren’t many homes for sale, high mortgage rates and high prices are starting to push home prices down. In fact, we learned this week that the Case-Shiller U.S. National Home Price Index showed the first month-to-month drop in U.S. home prices since 2012.

During the pandemic housing boom, mortgage rates reached 3%. With mortgage rates at 6%, the U.S. housing market is trying to find a balance. But it’s still early in the game. And the ongoing drop in home prices hasn’t yet reached every market: Between May and August, the value of a home in San Jose went down by 10.6%, while the value of a home in Orlando went up by 2%.

Fortune talked to Ali Wolf, the chief economist at Zonda, to find out where the U.S. housing downturn will go next and if the home price correction will soon spread to more markets. She gives advice to the White House on housing issues when she’s not going around the country talking to builders.

Here is a Q&A with Ali Wolf from Fortune.

Fortune: As more data comes in, it’s pretty clear that home prices are falling in many markets across the country. Some parts of it are pretty sharp. Do you expect home price declines to continue into 2023?

Wolf: We haven’t seen home prices fall everywhere in the country yet, but they have started to fall in some markets, and we expect that to happen in more metro areas across the country in the next few months. Home prices are likely to go down in 2023 as long as interest rates stay high and consumer demand stays low.

What kinds of markets are most likely to be hurt?

The most vulnerable markets are 1) those like Boise, Las Vegas, and Denver, where home prices went up quickly because of hybrid work. 2) Markets like Nashville and parts of Florida that don’t have enough jobs to support the higher home prices. In other words, these are markets where home prices and incomes don’t match up. 3) Cities such as Phoenix and Austin, where the number of available homes for sale has increased rapidly.
The housing booms in Austin, Boise, and Phoenix were some of the first and strongest in the country as a whole. The combination of record-low mortgage interest rates and changes in lifestyle brought on by the pandemic, such as more people working from home and moving, caused a huge rise in the number of people looking for a place to live, and the number of homes available couldn’t keep up.

People who relocated from California and Washington were able to use the proceeds from the sale of their homes in a more expensive market to purchase a new home in a less expensive market. Moving buyers discovered that these markets were significantly cheaper than where they were coming from, which harmed local buyers.

People in these markets thought that the imbalance between supply and demand was so big and had been going on for so long that the markets could never get too hot. Buyers were so eager to get a home that they were willing to pay almost anything to get one. Investors and flippers saw these markets as good places to make money. This way of thinking led to a huge rise in home prices.

But when interest rates went up at the beginning of 2022, people started to face the truth. Home prices weren’t going up as quickly as they used to, and not every home that went on the market sold for more than its list price within a day. Demand for housing dropped just as some of the new homes that were being built started to open. At the same time, the number of already-built homes quickly grew as sellers tried to time what they thought would be the top of the market.


Leave A Reply

Your email address will not be published.