Why Economists Are Predicting House Prices to Fall Next Year
From incredibly high inflation to a record high 7% mortgage rate , it’s been a tough year for would-be homebuyers. Much is needed to understand this housing market , but especially in recent months, experts have been speculating whether this housing market is showing the same ominous signs of crisis as it did in 2008. While it was predictably difficult to get a straight answer from economists, some now say they expect a “crash” in house prices to come soon. Here’s why some experts are making this prediction and what falling home prices mean for you in 2023.
Current state of the housing market
Simply put, the housing market is experiencing low demand from homebuyers. Instead, we are seeing an increase in rental demand, with even wealthier households choosing to rent rather than buy. There are also inventory issues as there are fewer available units on the market. And while demand from buyers is low, there is little hope for the construction of new (potentially available) facilities. To sum up: there were fewer buyers on the market this year, as finding a house at an affordable price was not an easy task.
As a result , home sales have fallen over the past nine months . According to reports from Axios and Forbes , housing experts are predicting a further drop in house prices in the new year. As high mortgage rates and slowing sales hit the market, industry leaders such as Goldman Sachs recently forecast a 5% to 10% drop in home values through March 2024. does the scale of the housing slowdown mean to you?
What does falling home prices mean to you?
During the pandemic, we saw house prices rise, causing many would-be homeowners to be squeezed out of the market at the time. Goldman Sachs says that even if home values fall by 5-10%, home values should not be expected to fall to pre-pandemic levels. You may also have noticed that mortgage rates have come down over the past few weeks, but according to Axios , they are still not low enough to significantly affect demand.
Most importantly at this point, Forbes explains, these projections still don’t necessarily indicate that we’re heading for a crash like we did in 2008. The main reasons for this are that unemployment remains low and many existing homeowners still benefit from being locked up on the rock. are the lowest in recent years. This means that a surge in defaults (like the crash of 2008) is unlikely.
Conclusion: Experts predict a decline in house prices, but not a complete market disaster. In the end, it’s important to keep in mind that this is all still speculation. The experts have already been wrong.