Housing Market Forecasts: Where Home Values Will Plummet Most, According to Economist

Housing Market

Housing Market Forecast 2022: Zillow  :

Are you a home buyer who is dissatisfied with the hot housing market? You might find some solace in a recent Zillow analysis. Are you fed up with the housing market? In a new analysis, real estate specialists predict that by 2023, the market will start to favor buyers again. Although mortgage rates are close to 7%, inventory is still limited compared to pre-pandemic levels, and property prices are slowly declining.

Nevertheless, according to 44% of 107 economists and housing experts surveyed by real estate giant Zillow for its Home Price Expectations Survey, the U.S. housing market will change in favor of home buyers by the end of 2023. Furthermore, 12% of these experts thought the shift would occur sooner this year.

The market will change in favor of buyers starting in 2024, according to about 45% of the experts questioned by Zillow. All survey participants predicted a slowdown in home price growth in 2023.

Additionally, there are already some indications of pricing pressure: According to the National Association of Realtors, the typical cost of an existing home in the United States fell to $389,500 in August from $403,800 the previous month.

Pandemic boomtowns like Boise, Austin, and Raleigh are among the places where home values are most likely to fall over the upcoming year, according to most of the housing experts surveyed by Zillow (77% of them). During the early stages of the coronavirus epidemic, they experienced a tremendous increase in sales.

Another real estate brokerage firm, Redfin, reported that home purchasers in the Sun Belt are breaking their home-purchase agreements at the highest rate relative to the rest of the country. According to Zillow, midwestern towns like Columbus, Indianapolis, and Minneapolis are among the markets that are least likely to experience a drop in property values during the upcoming year. Only 36% of respondents thought housing prices in these locations would drop during the following 12 months.

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According to the respondents, demand is also anticipated to remain strong in a few southern regions like Atlanta, Nashville, and Charlotte. Only 44% of respondents thought home price drops were likely. Expect rent growth to continue, Zillow said, but for all prospective purchasers who are now stuck renting, either mortgage rates or housing prices make owning a home expensive.

Over the next 12 months, Zillow anticipates rent increases to outperform inflation, stock prices, and property values. Redfin said that in only the previous six weeks, the typical house buyer’s monthly mortgage payment for a home at the median asking price increased by $337 to $2,547, a 15% increase. Compared to a year ago, when rates were at 3.01%, that has increased by 50%.

Trends in Home Prices Currently :


The CoreLogic HPITM is meant to give a head start on home price trends. With analyses and projections through July 2022 and July 2023, the CoreLogic Home Price Insights report offers an interactive picture of our Home Price Index product. In July 2022, compared to July 2021, home prices countrywide, including distressed sales, rose 15.8% yearly.

In July 2022, compared to June 2022, housing prices dropped 0.3% every month. According to the CoreLogic HPI Forecast, housing prices will rise by 3.8% from July 2022 to July 2023 and by 0.3% month over month from July 2022 to August 2022.

The month-over-month fall signals additional slowing is imminent, even though the annual price increase is still in the double digits. By July 2023, CoreLogic anticipates a more balanced housing market, with year-over-year growth falling to 3.8%. In July, housing prices nationwide rose 15.8% year over year.

There was no annual fall in housing prices across any state. Florida (29.6%), South Dakota (23.7%), and Tennessee (23.2%) saw the most significant gains year over year. Large cities continued to see price rises in July, with Miami leading the way with a 27.1% year-over-year increase, Phoenix leading with a 22.1% increase, and Las Vegas trailing at 21.6%.


In the upcoming months, the price of homes will increase considerably more gradually. According to CoreLogic’s Home Price Index prediction, annual home price growth will decrease to 10% by December, which is half the 20% peak increase recorded in April 2022. In contrast to the 17.4% and 18.7% rise in June, the 10- and 20-city composite indices slowed down, increasing by 14.9% and 16.1%, respectively, year over year.

Among the 20 tracked cities, Tampa, Florida, saw the most significant annual home price increase in July, rising 31.8% from June’s non-seasonally adjusted pace of 35%. Miami decreased from June’s 33% growth to a 31.7% increase year over year in July. Dallas increased by 24.7% in July, trailing Atlanta and Charlotte, North Carolina. Phoenix’s housing market dropped from first place in the index in February to sixth place with a 22.4% increase, down from that position’s most vital price growth position at 32.9%.

Freddie Mac’s Housing Market Forecast through 2022 :


According to Freddie Mac, there are currently 18% more people aged 25 to 34 than there were in 2006. From 39.5 million in 2006 to 46.1 million now, this indicates an increase of 6.6 million potential first-time homeowners. Along with the rise in first-time homeowners, there has also been an increase in the number of high-income renters who can afford to buy and are in the prime first-time homebuyer age group.

The lending standards were drastically eased in 2006, and there was little investigation into whether or not a borrower could repay their loan. The standards are now stricter, reducing the risk for borrowers and lenders. The percentage of buyers who experienced at least one mortgage denial before being authorized increased from 22% in 2020 to 34% in 2021, consistent with a more difficult housing market for buyers.

The most notable tightening in the previous month was in the government and jumbo categories. There is no way to compare the two home markets because they are vastly different from one another. The Mortgage Bankers Association releases the Mortgage Credit Availability Index (MCAI) regularly throughout the year (MBA). How easy it is to obtain a mortgage is gauged using this index.

There are more alternatives for acquiring mortgage financing the higher the index is. The index was circling about 400 in 2004. Mortgage loans became more readily available as the housing market heated up, and in 2006 the index topped 850. The decline in the real estate market hurt the mortgage credit availability index (MCAI), making it practically impossible to get mortgage financing.

Thankfully, the lending requirements have loosened a bit, albeit the index is still relatively low. In August 2022, the index had a reading of 108.3, around one-seventh of what it was in 2006. It has dropped more than 30% from pre-pandemic levels. Many Americans struggle to locate the home of their dreams since fewer options are available on the property market.

In August, the MCAI decreased by 0.5 percent. Increases in the index are a sign of relaxing credit, while declines in the MCAI are a sign of tightening lending requirements. In March 2012, the index was benchmarked at 100. While the Government MCAI stayed steady, the Conventional MCAI fell by 1.0 percent.

Chronic underbuilding over the past ten years and the entry of millions of millennials into the housing market have led to a significant mismatch between housing supply and demand. The home market won’t collapse anytime soon, despite the soaring mortgage rates. The appreciation rate will be substantially lower than it was over the previous two years. We are forecasting the housing market for the next five years to identify trends that might affect real estate values and rental rates over more than a year.

According to Freddie Mac’s regression analysis, a 1% increase in mortgage rates diminishes home price rises by roughly 4%. (for example, moving from 11 percent home price growth a year to 7 percent ). J.P. Morgan analysts anticipate a higher impact of about six percentage points less home price growth.

The housing market may be more vulnerable to rate rises now than in the past since home prices are so high; as a result, the higher estimate seems reasonable. Even though it appears evident that increasing interest rates will decrease housing demand by making homes less affordable, the actual history is a much less reliable predictor of what will happen due to a sizeable balancing effect — interest rates frequently increase when the economy is flourishing.

According to the government-sponsored enterprise, house sales would drop by about 5%, and price growth would be slowed by four to six percentage points for every one percentage point increase in mortgage rates. Their estimate anticipates a much slower but positive increase in house prices with a wide geographical range based on migration trends if mortgage rates stabilize at current levels and all other factors remain constant.

It is projected that the housing market will continue to be undersupplied and that migration to lower-cost locations will increase as work-from-home becomes more and more common. This is significant since most growing cities suffer from severe housing scarcity due to a recent population influx.

Finally, favorable demographics indicate that there will continue to be a strong demand for first-time homebuyers. This is because many young renters still make enough money to support homeownership, and they will likely continue to be a powerful influence for the foreseeable future. These factors should continue to significantly impact the housing market as the economy encounters various challenges over the following months and years.

Freddie Mac gauges public opinion by surveying the public on housing-related issues every quarter. Market confidence fell to its lowest level since the outbreak started in the second quarter of 2022. In addition, they observed an increase in housing payment challenges, particularly among renters, due to the impact of rising inflation on the cost of living.

Over the upcoming year, 51% of respondents are optimistic about the housing market.
This is a 7-point decline from the previous quarter.
Over 30% of monthly income is spent on housing by 24% of homeowners and 56% of renters.
51% of people, an increase of 4% from the previous quarter, are concerned about paying their mortgage.
This is true for 38% of homeowners and 68% of renters, a 10-percentage-point increase from the previous quarter (a 3-percentage-point decrease from last quarter).
In the next six months, 24% expect to purchase a home.
In the upcoming six months, 17% of homeowners plan to sell their homes.
23% of homeowners plan to refinance their mortgages in the upcoming six months.

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