Source: CNN Business —
Last year was a wild ride in the US housing market. Mortgage rates doubled and sales plummeted, triggering the longest month-to-month slump on record. A lot of would-be buyers and sellers watched from the sidelines.
Throughout 2022, the Federal Reserve hiked its benchmark interest rate at a record pace to slow the economy and fight high inflation. Housing took the brunt of the impact, as the most interest rate-sensitive sector of the economy. The Fed’s actions had the intended effect, though, with housing affordability deteriorating and demand dwindling, which led to declining sales and slower annual price growth.
So what’s in store for the housing market this year? Home prices rose nearly 40% from the spring of 2020 to the spring of 2022, representing roughly a decade of price gains in just a couple of years. Will what went up also come down?
Housing experts and economists are not in agreement.
Economists’ predictions range from prices rising by around 5% this year, according to Realtor.com, to as much as a 22% decline from the peak in 2022 to the trough, according to John Burns Real Estate Consulting.
What happens with inventory, mortgage rates, and the broader economy will likely determine which tack the market takes.
“Mortgage rates are really critical to the path of the housing market in the year ahead,” said Jeff Tucker, senior economist at Zillow. “We are watching to see affordability gradually improve. That should breathe some life back into the market.”
Another thing he’s keeping an eye on is inventory of homes for sale, which is already almost back up to where it was in 2020, he said.
“Yes, things have cooled way down in the housing market, but we don’t have a glut of homes for sale,” said Tucker. “That is the main thing that is buffering us from runaway price declines.”
Where will home prices go?
Zillow forecasts that home prices nationally will decline by between 1% and 4% from last June’s levels, the 2022 peak.
“Seeing prices that are staying flat to 1% or 4% down puts us on the more bullish side for price changes of forecasters out there,” said Tucker.
But he said the tight inventory picture and strong unmet demand to buy a home suggests to him that, should mortgage rates drop a bit, there will be more movement in the market.
;
