(Molly Bruns, Headline USA) Ian Shepherdson, chief economist of Pantheon Macroeconomics, predicted that the price of residential homes could fall by a maximum of 20% in 2023, as mortgage-rate hikes continue to reduce demand of properties.
Mortgage rates are at their highest since 2002, and Shepherdson explained that homeowners are unlikely to purchase a new property unless absolutely necessary, the Daily Caller reported.
“[W]e expect home sales to keep falling until early next year,” said Shepherdson. “By that point, sales will have fallen to the incompressible minimum level, where the only people moving home are those with no choice due to job or family circumstances.”
“Discretionary buyers are disappearing rapidly in the face of the near-400 [basis point] increase in rates over the past year.”
Goldman Sachs economists estimated the decline would be less extreme, coming in between 5% to 10%.
The economists for Goldman also noted that “the housing market is tight, mortgage quality is solid and a large proportion of the mortgages have a fixed rate,” which is expected to stifle the impact of the crash.
The median existing home sales price rose 8.4% from September 2021, when it was $355,100, to $384,800 in September 2022.
A 20% decline in price would result in median existing home prices being around $307,840.
The pushing of elevated mortgages contributed to a 38% decline in demand for new mortgages along with an 86% annual decline in demand for refinancing.
Declining demand for housing and steadily increasing mortgage rates paint a worrisome picture for many Americans.
Real-estate company Redfin compiled data on the phenomenon, showing that buyers’ spending power is shrinking.
“Simply put, people cannot afford the same home as they could have a year ago,” said Daryl Fairweather, an economist with Redfin.
The data also showed that buyers were likely to back out of deals, with 15% of potential buyers walking away—up from 11.2% in June of 2021.
Financial data firm Black Knight found that the rise in mortgage rates increased the borrower’s monthly payment by 44% since the start of 2022. Since the beginnings of the pandemic the average mortgage payment has doubled.
Despite the Biden administration’s best attempts to spin what looks like an upcoming economic crisis, all signs point to trouble for Americans in the coming months.
Home price declines accelerate:
U.S. home prices over the three months ending in August declined 0.9% compared to the three months ending in July.
(Prices in the three months ended July had declined 0.3% from the three months ended June.) https://t.co/gku4X7QgIf pic.twitter.com/NAu5JFlH8j
— Nick Timiraos (@NickTimiraos) October 25, 2022
