“We saw [home] Prices have risen sharply over the past two years. So this is changing now. “Interest rates have gone up,” Powell told reporters in June. We are well aware that mortgage rates have gone up a lot. And you see a changing housing market. We are watching it to see what happens. To what extent will it really affect residential investment? I’m not really sure. How will it affect housing prices? I’m not really sure.”
“I would say if you are buying a home, or someone or a young person looking to buy a home, you need a little bit of Reset. We need to get back to a place where supply and demand are back together and where inflation is down again, and mortgage rates are down again.”
Obviously, the Fed’s “housing reset” will give homebuyers more choices (ie stock high) and more breathing space (ie, fewer bidding wars). The question mark – which Powell admitted in June – will drive home prices down? Historically, home prices remain constant until the economy imposes a seller’s hand.
To better understand where housing prices are headed, luck CoreLogic has been reached out to see if the company will provide us with information updated August assessment of the country’s largest regional housing markets. To determine the potential for lower regional home prices, CoreLogic evaluated factors such as income growth expectations, unemployment expectations, consumer confidence, debt-to-income ratios, affordability, mortgage rates, and inventory levels. CoreLogic then placed regional housing markets into one of five categories, grouped by the probability of home prices falling in that particular market between June 2022 and June 2023. Here are the groups that the real estate research firm used for its August analysis:
- very high: More than 70% chance of lower price
- high: 50% – 70% chance
- Average: 40% – 50% chance
- a little: 20% – 40% chance
- too low: 0% – 20% chance
Between June 2022 and June 2023, CoreLogic expects US home prices to rise another 4.3%. But this is at the national level. At the regional level, some markets are at high risk of falling prices.
Of the 392 regional housing markets it looked at, CoreLogic found that 125 had a greater than 50% chance of seeing local home prices fall over the next 12 months. In July, CoreLogic found that 98 markets had a greater than 50% chance of home prices falling over the next 12 months. In June, 45 markets were at risk. In May, only 26 markets fell into this camp.
Why does CoreLogic keep lowering its risk assessment? This boils down to the tense US housing market data. On an annual basis, existing home sales and new home sales fell 20.2% and 29.6%, respectively. This is the largest contraction in housing activity since 2006.
“The potential for lower home prices continues to increase as mortgage rates hit a new high in June and housing demand has declined significantly,” says Salma Hebb, Deputy Chief Economist at CoreLogic. lucke.
Downside risks remain concentrated in areas that have experienced very high home price growth over the past two years, but not the same level of population and income growth, and areas that are historically more sensitive to increased mortgage rates and signs of stagnation.
Of the 392 regional housing markets that CoreLogic measured, 67 in August had “very low” odds of lower home prices over the next year. There are another 133 housing markets in the “low” group and 67 markets in the “medium” group. CoreLogic put 85 markets in the “high” camp. CoreLogic rated 40 markets as having “very high” odds of lower home prices over the next year. This includes major markets such as Boise, San Francisco, and Lake Havasu City.
The real estate industry should always be on high alert when the Federal Reserve switches to anti-inflation mode. After all, this sector is the most interest rate sensitive sector in the economy. However, some regional markets should be on a higher alert than others. Historically, when the housing cycle “turns around”, it is usually the “overvalued” housing markets that are most at risk of a home price correction.
According to CoreLogic, 75% of the country’s regional housing markets are “overrated” relative to economic fundamentals. Many of these buttery markets, such as Boise, are most at risk of a price correction. However, there is one big exception: San Francisco. While CoreLogic says the Bay Area is at a “very high” risk of falling home prices, it says the market is not overstating it. What’s going on? High-cost tech hubs, such as San Francisco and Seattle, are being hit hard by the technology slowdown. Not only are their high-end real estate markets more rate sensitive, but so are their technology sectors.
A growing group of research firms agree with CoreLogic that markets like Boise and San Francisco are at risk of lower home prices. However, CoreLogic positions Phoenix – a market where the stock has soared to 2019 levels – as the “low risk” of a price drop is surprising. Research groups such as Moody’s Analytics and John Burns Real Estate Consulting predict that home prices in Phoenix will fall over the next year.
“People don’t expect prices [in Phoenix] To increase the speed, or anymore. The median price of a Metro Phoenix home has fallen in the past two months. If prices keep dropping long enough, people will eventually expect prices to keep dropping in the future and then we can see the other side of the housing market in 2021,” said John Wick, an independent real estate analyst in Phoenix, luck.
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