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The good news is they don’t expect the market to implode like it did ten years ago, even as the real estate industry records some ludicrously high sales and areas like Seattle hit record prices. However, an economic downturn will negatively impact the pace of growth in home prices over the next five years. Its 10-year growth rate of 14.4% is more than 1.5 times that of the U.S. population growth rate. The state will add more people in the years to come; population projections forecast a 17.7% increase in Georgia's population by 2030. 44.9% of properties sold below list price in July 2022, a decrease of 5.7 percentage points year-over-year.
These days, the requirements are more stringent, which lowers the risk for both the lenders and the borrowers. Consistent with a more challenging housing market for buyers, the share of buyers that faced at least one mortgage denial before getting approved grew from 22% in 2020 to 34% in 2021. Home sales activity kicked out 2022 stronger than anticipated, but rising costs have led to altering their forecast downward.
NAR: Existing-home sales fall 7.7% in November
High interest rates and inflated home values have made purchasing a home challenging for first-time homebuyers. Historically, rising mortgage rates don’t always lead to lower home prices. Rising interest rates tend to cause increases in home values to shrink. However, given that interest rates have risen so quickly this year, they might force home prices to come down.
Existing-home sales descended in September, the eighth month in a row of declines. The market is heading to cool off, but house prices will not necessarily fall like crazy. The slowing effect of rising mortgage rates on the housing market has been mostly predicted, and home values appear to have already begun to trend downward.
Falling for an Open House Trap
A minimum annual income of $192,800 was needed to make monthly payments of $4,820, including principal, interest, and taxes on a 30-year fixed-rate mortgage at a 5.72 percent interest rate. Courtesy of Car.orgLet us look at the price trends recorded by Zillow over the past few years. Since the last twelve months, California home values have appreciated by nearly 8.7% — Zillow Home Value Index.
There are many different ways you can calculate this, and that's why there are so many different house price indices. The FHFA house price index, for example, doesn't include very expensive homes, so it's more stable over time, whereas the Case-Shiller index includes the wild swings that high-priced homes can go through. With fewer would-be homeowners entering the market, housing developers start to taper off the number of new homes being built. During the Great Recession, for example, new housing starts dropped by 36%. Rather, it's more of a phenomenon that—by the time we're in the midst of one—most experts can agree that we're in a period of a sustained decline in economic activity.
December brings a record increase in housing supply
As the average 30-year fixed mortgage rate is projected to remain over 6.5 percent for the remainder of the year, home values will continue to decline as affordability remains a concern. Home sales have fallen for 17 straight months year over year, and it was the fourth time in the last five months that sales dropped more than 30 percent from the year-ago level, according to C.A.R. Nationally, the U.S. housing market has experienced positive annual appreciation each quarter since the start of 2012. Between the second quarters of 2021 and 2022, all 50 states and the District of Columbia saw an increase in housing prices. In today's housing market of high mortgage rates, buyers are still driving up property prices, leading homes to sell rapidly.
Bellingham, WA; Boise City, ID; Crestview-Fort Walton Beach-Destin, FL and Olympia-Tumwater, WA are also at very high risk for price declines. In September, Zillow economists predicted that 259 regional housing markets would see declining home values in the coming year. The number was later revised to 271 regional markets by Zillow economists in October. They now predict that home values will fall in 314 of the nation's 897 regional housing markets between October 2022 and October 2023. Great Bend, KS tops the list with the highest anticipated decline of 6.7%. As higher interest rates and ongoing elevated construction costs continue to price out a large number of prospective buyers, the single-family homebuilding industry will experience a sharp decline in 2023.
According to the National Association of Realtors, pending home sales on existing properties fell 4.6% in October. Meanwhile, existing home sales plunged 32% between January and October 2022. Homebuyers will benefit from a growing number of homes for sale, but costs will stay high, limiting affordability as budgets tighten.
“Get preapproved for a loan as soon as you can so you know what you can afford,” Fairweather suggests. “Begin with a full review of your finances, net worth, and earning potential,” says Fairweather.
The firm predicts a 24.1% drop in property prices in Morristown, Tenn., and a 23.3% drop in Muskegon, Mich. Housing markets such as New York and Chicago will see a decline of 6.3% and 4.2%, respectively, from peak to trough. They expect “significantly overvalued” housing markets like Boise, Flagstaff, Seattle, and San Francisco to see the sharpest declines in home prices. The Federal Reserve boosted interest rates once more last week, although the recent reprieve on mortgage rates may inspire some purchasers to capitalize on the recent market move.
If buyers and sellers have unreasonable expectations, 2023 could be a stalemate. In its most recent prediction, Fannie Mae reiterated its opinion that the housing market will push the United States into recession at the beginning of 2023. Freddie Mac's own regression research indicates that a 1 percent rise in mortgage rates reduces home price increases by around four percentage points . Morgan expect a greater impact of around six percentage points lower home price increase. The higher the index is, the more options there are for obtaining mortgage finance. As the housing market heated up, mortgage loans became more available, and then in 2006, the index surpassed 850.
Economic activities are ramping up in all sectors, mortgage rates are rising, and jobs are also recovering. The housing market remains largely a seller's market due to demand still outpacing supply. The inventory of available houses continues to be a constraint on both buyers and sellers. According to C.A.R.'s “2023 California Housing Market Forecast,” existing single-family home sales will fall 7.2 percent next year to 333,450 units, down from 359,220 units in 2022. The forecast for 2022 is 19.2 percent lower than the 444,520 residences sold in 2021. The median home price in California is expected to drop 8.8 percent to $758,600 in 2023, after rising 5.7 percent to $831,460 in 2022 from $786,700 in 2021.
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