Home Price Correction Intensifies – What to Expect from the US Housing Market in 2023

This, of course, is what we see now. Despite favorable demographics and limited inventory levels, affordability is under pressure –Mortgage rates rise Coupled with rising house prices – I started driving home prices down. In fact, this week we learned that home prices in the United States are measured by Case-Shiller home price index in the United States It recorded its first monthly decline since 2012.

Across the country, the US housing market — which has been priced at mortgage rates of 3% while it Pandemic housing boomIt is working to achieve a balance in the face of mortgage rates of 6%. But we are still in the first rounds. And the Constant correction of house prices It did not reach all markets: between May and August, Home values ​​in San Jose fell 10.6% while home values ​​grew by 2% in Orlando.

To better understand where Housing downturn in the United States Heading next – and if the house price correction hits more markets soon –luck I reached out to Zonda’s chief economist, Ali Wolf. When she’s not traveling across the country talking to home builders, she’s traveling Advise the White House on housing issues.

at the bottom is luckQ&A with Ali Wolf.

luck: As the data goes through, It is quite evident that housing prices are declining in many markets across the country. In some places it is rather sharp. Do you expect housing prices to continue to decline until 2023?

Wolf: We haven’t seen housing prices drop globally across the country, but there are some markets where house prices are starting to come down and we expect to see that in more metros across the country in the next few months. Home price corrections can be expected in 2023 as long as interest rates remain high and consumer demand remains sluggish.

What types of markets are most at risk?

The most vulnerable markets include: 1) those where home prices have risen sharply due to hybrid work, such as Boise, Las Vegas and Denver. 2) Markets that do not have a local employment base to support high home prices (in other words, markets where home prices and incomes are out of control), such as Nashville and parts of Florida. 3) Markets where housing stock has risen rapidly, such as Phoenix and Austin.

Why Markets like Austin, Boise and Phoenix are changing very quickly?

The housing booms seen in markets such as Austin, Boise, and Phoenix were among the nation’s earliest and most severe booms. Record low mortgage interest rates combined with lifestyle changes brought about by the pandemic, including working from home and an increase in relocations, have dramatically increased demand and supply for housing.

Those who moved from places like California and Washington were able to take advantage of home ownership from selling in a higher cost market and put that money into buying a new home in these relatively affordable markets. Resettlement buyers found these markets to be affordable compared to where they were relocating from, at the expense of local buyers.

There was a belief in these markets that the imbalance between supply and demand was too dangerous and long-term for the markets to overheat. Buyers, frantic to secure a home, were willing to pay almost any price to secure a home. Investors and flippers considered these markets ready for opportunity. This mindset has contributed to the massive rise in home prices.

With interest rates rising in early 2022, the reality is starting to unfold. Home prices were slowing down and not every home listed was sold above the list price within a day of going online. Housing demand has slowed as some new homes under construction are starting to appear online and the existing home inventory has increased rapidly as sellers try to determine when they think is the top of the market.

how do you expect Mortgage rates approach 7% to affect the housing market? We were Already corrected with 5% mortgage rates. Should we expect things to ramp up at 6.5%-7% rates?

Housing affordability is driven by many factors, but the two main inputs are home prices and mortgage rates. We just lived through a unique period in American history where rising home prices were offset by record-low interest rates. Cheap financing helped keep your monthly mortgage payments in check.

Interest rates have risen significantly since the start of the year, though, putting pressure on housing affordability. Buyers really started exiting the market when interest rates went from 3% to 4% and every 100 basis point increase continued to drive millions of Americans out of home ownership.

If mortgage rates remain high for an extended period, we expect housing demand to remain subdued, new home construction will be constrained, and home prices will need to adjust their fall across the country.

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