After not too long Mortgage rates soared this springthe US housing market has slipped into what the industry likes to call a residential stagnation. mean residential activity levels, Like home salessharply shrinking. That’s not surprising: History tells us that the Fed’s fight against inflation means the so-called housing stagnation is right around the corner.
While housing stagnation is historically common, home price corrections are less common. This is why property speculators – as they did in 2006 – refuse to acknowledge the possibility of lower house prices. But they are wrong again.
As the data circulated this summer, John Burns Real Estate Consulting provided data to luck Show that buttery markets such as Boise and Phoenix They already got their house price peaks in the bang. Now, the home price correction appears to have bypassed the frenetic western housing markets.
Of the 148 major regional housing markets tracked by real estate consultancy John Burns, 98 have experienced a decline in home values from their peak in 2022. In 11 markets, Burns Home Value Indicator* Already decreased by more than 5%. Simply: The US home price correction is more severe – and more widespread – than previously thought.
“Our view is that you’re going to see — and we’re seeing it now — housing prices are going down even though supply levels aren’t ripping up. And I think that’s an interesting thing that is now beginning to surprise a lot of people,” says Rick Palacios Jr., head of research at John Burns Real. Estate Consulting, luck.
When the last housing cycle turned around in 2005, home prices didn’t fall until inventory levels rose dramatically. This time, housing prices are going down though Stock levels are still 41.5% lower than pre-pandemic levels. how is that possible? we will, Mortgage rates rise Along with a record rise in house prices Pushing the housing market to bubbly levels. And now buyers are paying back.
“The longer that [mortgage] Prices remain high, we see housing will continue to feel and you will have that reset mode. And the affordability reset mechanism that must now occur is in the works [home] the prices. Thus, there are a lot of markets across the country where we expect home prices to go down by double digits,” Palacios says.
The housing markets, which have been hit hard by the housing recession, fall into one of two groups.
The first is the high-cost technology hubs. In fact, the largest declines in home values can be found in San Francisco (down 8.2% from their peak in 2022), San Jose (down 8.2%) and Seattle (down 7.8%). Not only are their high-end real estate markets more rate sensitive, but so are their technology sectors.
The second group includes foam markets Like Austin (down 3.5%), Boise (down 3.5%), Phoenix (down 5.3%) and Reno (down 5.3%). The pandemic housing boom has seen home prices in markets like Austin and Phoenix far exceed what local incomes would historically support. According to Moody’sBoise alone is “overrated” at 72%. Historically, when the housing cycle “flips”, it usually hits the “overvalued” housing markets significantly.
While 98 markets have retreated from their peak, another 50 markets have not yet fallen from their peak prices in 2022. Most of these markets are located along the East Coast. Some of these markets, such as Newark and Louisville, saw more modest price gains during Pandemic housing boom. There are eleven of these markets in Florida, which have remained surprisingly resilient this summer
But just because the market hasn’t seen a fall in home prices doesn’t mean it won’t. In fact, this could be the first round of a home price correction: Since May, real estate consultancy John Burns has predicted that US home prices will fall in both 2023 and 2024.
from peak to bottom, Moody’s Analytics expects US home prices to fall by up to 5% in this cycle. In massively “overvalued” housing markets, Moody’s Analytics expects a 5%-10% decrease. This call does not assume a recession. If a recession emerges, Moody’s Analytics expects national home prices to fall 5% to 10%. In housing markets it is significantly “overvalued”The recession means they are likely to see home prices fall between 15% to 20%.
Several other research firms, including Zonda and Zelman & Associates, have come forward, predicting falling home prices in the United States. However, no one expects home prices in the US to fall on a par with the recent downturn in the housing sector. from peak to bottom, Home prices in the United States fell by 27% between 2006 and 2012.
“I know that he [double-digit home price declines] Sounds really bad, but the fact is you have to take a long-term look at this and have some perspective because those markets have seen a 30%, 40%, 50% plus increase over the last year or two. So we really squeezed into a year or two of high home prices. So even if our predictions are correct and prices fall by a factor of double in some of these markets over the next few years, we’ll just put the decline back to where home prices were in 2020 or early 2021, Palacios says. luck.
* The ongoing correction in the housing sector has seen sales of high-end homes decline at a faster rate than other price points. This, of course, distorts both average and median home sales prices. The Burns Home Value Index – a calculation of local home values - helps eliminate this noise for both new and existing homes. August 2022 results are preliminary.
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