The housing market today is a topic of much debate among experts. While there is no consensus on whether the historically tight housing market will loosen or not, it is evident that the market has cooled significantly from its previous highs. The housing market today is still a seller's market. Home prices are rising, inventory is low, and mortgage rates are increasing.
This makes it a challenging time to buy a home, but there are still opportunities for buyers who are prepared. In this post, we will discuss the latest housing market predictions & forecasts. Despite initial concerns of a housing market crash comparable to the Great Depression due to the pandemic, the market has remained stable. However, there are key factors to consider, such as rising home prices and potential declines in home sales due to supply-demand imbalances.
- The housing market is expected to continue to cool down in the coming months, as rising mortgage rates and inflation make it more expensive to buy a home.
- However, home prices are still expected to rise, albeit at a slower pace.
- The housing market is expected to remain a seller's market for the foreseeable future, as demand for homes continues to outstrip supply.
The impact of higher mortgage rates and recession fears has contributed to the market's cooling from its peak earlier this year. Nevertheless, there are other factors that may influence the market's pace and favorability for both buyers and sellers. The market is gradually shifting away from being heavily skewed towards sellers, moving towards more balanced conditions. Buyers are still showing interest, maintaining some level of competition, particularly for attractively priced homes.
While real estate firms generally do not predict a financial or foreclosure crisis on the scale of 2008, they do anticipate a return to more typical housing fundamentals. This moderation may be driven by increasing salaries and declining home prices. As the correction takes place, the housing market is expected to reach a more reasonable valuation and avoid being overvalued.
ALSO READ: Real Estate Housing Market Trends for February 2023
Mortgage rates will likely play a significant role in determining the decline in home values. Interest rates have a substantial impact on the real estate market, influencing mortgage payments, housing demand, and prices. Although home prices are still experiencing growth, the rate of increase has slowed compared to earlier in the year. Despite this, buyer interest remains high, resulting in a somewhat competitive market, especially for homes that are priced attractively and possess desirable features.
However, concerns persist regarding the housing market, particularly regarding the shortage of housing supply and rising interest rates. The shortage of supply has been a primary driver of home price growth, but the increasing interest rates are discouraging potential sellers and new construction. As a result, there is limited hope for an improvement in the housing supply and the establishment of a sustainable market that would benefit from increased inventory.
The significant increase in mortgage rates since last year has further exacerbated the already expensive housing market, making it even less affordable. Home prices saw a meteoric rise during the pandemic, driven by factors such as high demand, low supply, and record-low mortgage rates. However, the sudden surge in mortgage rates has slowed the market's growth and affordability, posing challenges for buyers looking to enter the market.
As we explore the latest housing market predictions and forecasts, it becomes evident that the market's trajectory remains uncertain. Factors such as interest rates, supply-demand dynamics, and affordability will continue to shape the housing market. Staying informed about these predictions will be crucial for prospective buyers, sellers, and industry professionals navigating the ever-evolving housing landscape.
Housing Market Predictions for 2024
The housing market in the United States has been a topic of keen interest and speculation in recent times. Zillow, a prominent player in the real estate industry, has made a bold prediction that U.S. home prices will experience a significant jump of 6.5% by July 2024.
Zillow's Optimistic Forecast for the Housing Market
Back in February, Zillow's housing economists made a noteworthy call that U.S. home prices had reached their lowest point and would see a climb of 0.5% over the subsequent 12 months.
In the months leading up to this prediction, the U.S. home prices, as tracked by the Zillow Home Value Index, not only rebounded but also hit a new all-time high. This resurgence was attributed to the strong demand driven by limited inventory levels, outweighing the impact of elevated mortgage rates.
Zillow consistently revised its home price forecast upwards as the U.S. house price rebound continued. The latest revision projects a 6.5% rise in U.S. home prices between July 2023 and July 2024, surpassing the 6.3% forecast made just the previous month. It's worth noting that U.S. home prices, according to the Case-Shiller index, have historically averaged an annual increase of 5.5% since 1975.
“Limited for-sale inventory continues to push home prices upward even as mortgage rates remain elevated,” explained Zillow housing economists. They highlighted that the number of homes listed for sale in July was just over half of those in the same month of 2019.
Additionally, new listings entering the market were 29% fewer than the typical levels before the pandemic. This supply shortage has led to heightened competition among potential buyers. Homes that went under contract in July did so in just 12 days, significantly faster than the 2018 and 2019 averages.
Regional Variations
While Zillow anticipates a 6.5% increase in national home prices over the next year, its forecast model points out that 120 of the nation's 400 largest housing markets will witness even greater growth rates of 7.0% or more during the same period. These markets are spread across various regions of the country, including the West, South, Midwest, and Northeast.
Top 10 MSAs Where Home Prices Will Grow by July 2024
Here's a look at the top 10 Metropolitan Statistical Areas (MSAs) where home prices are projected to experience substantial growth by July 2024:
- Atchison, KS: Projected increase of 16.5%
- Rio Grande City, TX: Projected increase of 16.3%
- Parsons, KS: Projected increase of 15.7%
- West Plains, MO: Projected increase of 13.8%
- Jackson, WY: Projected increase of 13.1%
- Thomaston, GA: Projected increase of 12.9%
- Steamboat Springs, CO: Projected increase of 12.9%
- Edwards, CO: Projected increase of 12.7%
- Maryville, MO: Projected increase of 12.6%
- McMinnville, TN: Projected increase of 12.5%
Alternate Views
While Zillow's optimism is palpable, it's important to note that not all experts share the same sentiment. For instance, Morgan Stanley foresees a different trajectory for U.S. home prices in 2024. Their perspective suggests that home prices will experience a decline during this period, offering potential relief for prospective buyers.
Despite the differing opinions, one thing remains clear: the U.S. housing market is in a state of flux, influenced by factors such as inventory levels, mortgage rates, and economic conditions. As the months roll on, it will be fascinating to see how these predictions unfold and whether the market continues its upward trajectory or experiences the anticipated corrections.
Housing Market Predictions Until June 2024
As we look ahead to the coming months, CoreLogic provides us with valuable insights into the trajectory of the housing market until June 2024. Let's delve into the forecasts and assessments that shed light on what lies ahead for potential buyers, sellers, and industry observers.
Year-Over-Year Growth and Monthly Trends
As of June 2023, home prices nationwide, including distressed sales, experienced a year-over-year increase of 1.6% compared with June 2022. This growth in home prices reflects the resilience of the housing market and its ability to navigate changing economic conditions.
On a month-over-month basis, the momentum continued, with home prices rising by 0.5% in June 2023 compared with May 2023. CoreLogic emphasizes that these figures are subject to revisions as new public records data become available. Ensuring accuracy is paramount, and CoreLogic's commitment to incorporating the latest data ensures that the results remain up-to-date and reliable.
Identifying Housing Markets at Risk of Price Decline
The CoreLogic Market Risk Indicator (MRI) provides a monthly update on the overall health of housing markets across the nation. This valuable tool assesses the probability of home price changes over the next year and identifies markets that are at risk of potential declines. According to the MRI, several markets stand out as being at very high risk (with a probability of 70% or higher) for a decline in home prices over the next 12 months.
The markets flagged as very high risk include:
- Cape Coral-Fort Myers, FL
- North Port-Sarasota-Bradenton, FL
- Provo-Orem, UT
- Spokane-Spokane Valley, WA
- Lakeland-Winter Haven, FL
These areas are likely to experience challenges in maintaining or increasing home prices, and potential buyers and sellers in these markets should take note of these risk indicators.
National Housing Forecast: Steady Price Increases
Looking at the bigger picture, the CoreLogic Home Price Index (HPI) Forecast offers insights into the anticipated changes in home prices on both a monthly and year-over-year basis. The forecast suggests that home prices are projected to increase by 0.6% from June 2023 to July 2023 on a month-over-month basis. Furthermore, a year-over-year increase of 4.3% in home prices is expected from June 2023 to June 2024.
This forecast indicates that the housing market is poised for steady growth over the coming months. However, it's important to remember that forecasts are based on a combination of factors, including economic trends, interest rates, and local market conditions. Unforeseen events can also impact the trajectory of the housing market.
Hence, we can form an opinion that the landscape of the U.S. housing market is a complex tapestry woven by economic currents, supply and demand dynamics, and evolving trends. The housing market predictions until June 2024 offer a compass for individuals seeking insights into the future of home prices and market conditions. In this realm of forecasting, three significant players stand out: Zillow, CoreLogic, and Morgan Stanley.
Zillow harnesses its expertise to project a future where U.S. home prices could see a substantial 6.5% surge by July 2024. This optimistic projection underscores the resilience of the housing market and its potential to overcome challenges.
CoreLogic, on the other hand, provides a nuanced view of the market's health through its Market Risk Indicator (MRI). It identifies areas at a very high risk of experiencing home price declines, offering valuable insights for potential buyers and sellers to navigate market uncertainties.
Meanwhile, Morgan Stanley introduces a different perspective, anticipating the possibility of a decline in home prices during 2024. This stance reflects the intricate dance between economic factors and market dynamics.
As individuals traverse the path forward, the insights offered by these forecasts empower them to make well-informed decisions. Whether one is considering purchasing a new home, selling a property, or simply observing market trends, the knowledge gained from these analyses serves as a powerful tool that guides choices.
Staying vigilant is key as we venture into the coming months, as economic shifts, interest rate fluctuations, and local market dynamics continue to play a vital role in shaping the housing market. The interplay of these factors is at the heart of the intricate web that defines the housing landscape.
The housing market's trajectory is a spectrum of possibilities, from Zillow's optimistic projection to Morgan Stanley's cautionary anticipation. The interaction of supply and demand, the influence of interest rates, and the broader economic environment will collectively determine the path of U.S. home prices.
In this evolving narrative, prospective buyers, sellers, and industry experts are poised to closely monitor unfolding developments. These predictions have the potential to reshape the contours of the U.S. housing market, influencing strategies and decisions.
Ultimately, understanding the forecasted predictions and trends equips individuals with the insights they need to navigate challenges, seize opportunities, and make informed decisions in a dynamic and ever-evolving housing market.
Housing Market Predictions for 2023
Fannie Mae, a leading source of mortgage financing in the United States, has released its latest housing market forecast. The forecast provides insights into the anticipated trends and expectations for home sales, housing starts, and mortgage originations.
Home Sales Forecast:
Fannie Mae's overall home sales forecast remains relatively stable, with a slight revision in the numbers. The projected total sales for 2023 have been revised upward to 4.86 million units, compared to the previous estimate of 4.84 million units. This revision suggests a slightly more optimistic outlook for home sales in the current year. However, for 2024, there has been a slight downward revision to 5.01 million units, previously estimated at 5.03 million units.
Housing Starts Forecast:
The forecast for housing starts, which refers to the number of new residential construction projects initiated, has seen an upward revision. This revision is mainly attributed to a more positive outlook for near-term single-family housing starts. While the adjustment is modest, it indicates a favorable trend in new construction activity.
Mortgage Originations Outlook:
Fannie Mae's purchase mortgage originations outlook has experienced a modest upward revision, aligning with the revision in home sales. This adjustment reflects the expectation of increased mortgage originations in line with the projected growth in home sales. However, the positive revision in purchase mortgage originations has been offset by a downward revision in refinance originations. As a result, the overall impact on total originations for 2023 is minimal, with the projected volume remaining at $1.65 trillion, unchanged from the previous forecast of $1.66 trillion.
Looking ahead to 2024, Fannie Mae anticipates a further increase in total originations, with a projected volume of $2.03 trillion. This figure represents a slight upward revision from the previous estimate of $2.02 trillion. The revised outlook for mortgage originations in 2024 suggests continued growth in the housing market and mortgage financing activities.
In conclusion, Fannie Mae's housing market forecast indicates a relatively stable outlook for home sales, housing starts, and mortgage originations. While there have been slight revisions to the numbers, the overall trends point towards a resilient housing market with modest growth expectations. As the market evolves, it will be essential to closely monitor these projections to make informed decisions in the real estate and mortgage sectors.
According to the National Association of Realtors (NAR), home prices are expected to increase by 1.2% this year. This projection indicates a continued upward trend in the housing market. Additionally, NAR predicts that mortgage rates will plateau at about 6.4%.
Goldman Sachs and Wells Fargo have both recently made forecasts for the US housing market in 2023, and their predictions suggest a decline in home prices. Goldman Sachs is forecasting a more significant drop, with a projected decline of 7.6% from the peak, while Wells Fargo predicts a more modest decrease of 5.5%. Both banks attribute the anticipated drop to the current housing supply shortage, which has been a persistent issue in recent years.
It's worth noting that Wells Fargo also highlighted that there may be significant discrepancies in the extent of the price fluctuations depending on the desirability of a particular location. This could mean that some areas may experience larger price drops than others, depending on factors such as local economic conditions, population growth, and housing supply and demand dynamics.
The accounting firm KPMG LLP's forecast for the housing market in 2023 looks bleak. Existing home sales are predicted to drop by 23% from 2022, which would be a decrease not seen since 2007. The drop is expected to be driven by single-family home sales due to the limited supply and high prices. However, condos are predicted to fare better.
The number of purchase applications has dropped by over 40% from a year ago in February. Buyers are betting on rate cuts by the Fed as their mortgages reset in 2024, and they are using adjustable-rate mortgages (ARMs) to get into the few homes that are listed. Despite the spike in rates and erosion in affordability, millennials still make up over half of the purchase applications.
The share of those who have locked into ultra-low rates or paid off their mortgages has surged. Those homeowners have a natural hedge against escalating shelter costs and some have chosen to rent out their homes to cash in on the demand for single-family rentals, further constraining the stock of homes.
Home prices are predicted to fall between 7% and 10% depending on the measure, with the S&P CoreLogic Case-Shiller Home Price Index expected to drop another 8% in 2023, bringing prices to the still elevated levels of late 2021. Despite the rise in demand for rentals, rents have fallen more rapidly than home prices, and the Fed is counting on those declines to cool inflation. However, the tight labor market may place a floor under how much rents fall in the hottest markets, hence the Fed's focus on the labor market.
According to Freddie Mac's Housing Sentiment in the First Quarter of 2023, market confidence in the housing market has rebounded somewhat quarter-over-quarter, despite payment concerns remaining unchanged among both homeowners and renters. Specifically, 43% of respondents are confident the housing market will remain strong over the next year, up 9 percentage points from last quarter but down 15 percentage points compared to last year.
However, concerns about housing affordability persist, with 59% of renters and 28% of homeowners spending more than 30% of their monthly income on housing. Additionally, over half of the respondents (54%) expressed concerns about making housing payments, with 70% of renters and 44% of homeowners feeling this way.
In terms of market activity, only 18% of respondents indicated they are likely to buy a home in the next six months, while 14% of homeowners say they are likely to sell in the same period. About 16% of homeowners plan to refinance in the next six months. Overall, while market confidence has rebounded somewhat, concerns over housing affordability and payment continue to persist.
Freddie Mac's Housing and Mortgage Market Outlook, released in May, provides valuable insights into the current state of the housing market and predictions for the future. The outlook addresses various aspects, including home sales, home prices, and mortgage originations.
Home Sales:
Higher mortgage interest rates have significantly impacted affordability, resulting in a dampening effect on home sales. The report anticipates that this trend will continue to weigh on home sales. Additionally, the limited inventory is expected to persist as existing homeowners, who have locked in low mortgage rates, are less likely to list their homes for sale. However, if the economy avoids a recession and unemployment remains stable, forced selling is unlikely to increase. With a stable interest rate environment, home sales are projected to level off and gradually resume modest growth. Nevertheless, it may take several years before volumes return to the levels observed in 2021.
Home Prices:
While home prices have generally shown positive trends in most markets, the report maintains a cautious outlook due to the potential impact of weakening employment. It is still too early to separate the true signal from the noise. The report's official corporate forecast predicts a 2.9% decline in house prices over the course of twelve months through Q1 of the following year. Furthermore, an additional 1.3% decline is projected over the subsequent twelve months.
Mortgage Originations:
The limited number of mortgages that are in the money for rate refinancing is expected to keep refinance origination volumes low. A substantial decrease in mortgage rates would be required to trigger a significant number of refinances. However, as rates fluctuate, some opportunities for refinancing may arise, resulting in a trickle of refinances.
Additionally, there continues to be demand for refinancing based on non-rate-related factors, such as the cancellation of FHA Mortgage Insurance Premiums by refinancing into a conventional loan and term extension. On the purchase side, low levels of home sales combined with falling national house prices are likely to keep home purchase originations relatively flat for the current year. However, as home price growth turns positive and home sales gradually increase, purchase originations are expected to resume modest growth in the latter half of this year and beyond.
Housing Market Predictions For the Next Few Years
The housing market is far better than it was a decade ago. During the two years of the pandemic, the housing industry experienced a boom, with the most significant annual increase in single-family house values and rentals, historically low foreclosure rates, and the highest number of home sales in 15 years, totaling 6.9 million for the entire year of 2021. Over those two years, national home prices increased by around 33%.
The market was driven by record-low borrowing rates in 2020 and 2021, as well as a supply constraint due to underbuilding. The enormous demand from first-time buyers is almost as important as the limited new supply. The housing market is also being driven by exceptionally favorable age demographic trends. But soaring interest rates are making mortgage payments more expensive since last year and cooling the hot real estate market.
The overarching concern is whether or not the housing market will crash, and if so, when. The simple answer is that it will not crash anytime soon and we certainly don't see a housing market crash coming in 2023 or 2024. Rising rates are cooling the market as some expected but the prices are still rising at a slower rate.
The current trends and the forecast for the next 12 to 24 months clearly show that most likely the housing market is expected to see a positive home price appreciation. In recent years, the price of homes has climbed dramatically. Many prospective buyers, especially those with limited financial resources, are eager to hear whether and when home prices will become more accessible.
Here is when housing market prices are going to crash. While this may appear to be an oversimplification, this is how markets operate. When demand is satisfied, prices fall. In many housing markets, there is an extreme demand for properties at the moment, and there simply aren't enough homes to sell to prospective buyers. Home construction has been increasing in recent years, but they are so far behind catching up. Thus, to see significant declines in home prices, we would need to see significant declines in buyer demand.
Demand declines primarily as a result of rising interest rates or a slowing economy in general. Ultimately, for rising interest rates to destroy home values, we'd need substantially less demand and far more housing supply than we presently have. Even if price growth moderates this year, it is extremely improbable that home prices will crash. Thus, there will be no crash in home prices; rather, there will be a pullback, which is normal for any asset class. The home price growth in the United States is forecasted to just “moderate” in 2023.
Affordability will be a concern for many, as home prices will continue to rise, if at a slower pace than the previous year. With 10 years having now passed since the Great Recession, the U.S. has been in the longest period of continued economic expansion on record. The housing market has been along for much of the ride and continues to benefit greatly from the overall health of the economy.
However, hot economies eventually cool, and with that, hot housing markets move more toward balance. Housing market forecasts are essentially informed guesses based on existing patterns. While the real estate pace of last year appears to be reverting to seasonality as we enter 2023, demand is not waning.
Increasing interest rates will almost certainly have a greater impact on the national housing market in 2023 than any other factor. While sellers remain in an advantageous position, price stability and the continuation of competitive interest rates may provide some much-needed relief to buyers this year. Housing supply is and will likely remain a challenge for some time as labor and material shortages, as well as general supply chain issues, delay new construction.
The housing market will continue to cool down, but not crash. Record-low borrowing rates, supply constraints, and first-time buyers drove prices up, but prices are expected to appreciate slower or remain flat for the next 12-24 months. Rising interest rates may lead to a pullback in prices and improve affordability. Nonetheless, it remains a concern as prices make it hard for some buyers to enter the market. Overall, the market will remain strong, but hot markets will move toward balance.
While the national housing market won't crash, several regional markets may see a decline in home prices in the coming years due to rising interest rates. Higher interest rates could lead to a decrease in affordability, which may result in fewer buyers in certain areas. As a result, regions that were previously experiencing rapid price growth may experience a slowdown or even a decline in home prices. However, it is worth mentioning that this would likely be a temporary setback, as long-term demographic and economic trends are still in favor of the housing market.
References
- https://www.realtor.com/research/
- https://www.realtor.com/research/blog/
- https://www.bankrate.com/mortgages/mortgage-rates/
- https://www.blackknightinc.com/
- https://www.freddiemac.com/research/forecast
- https://www.kpmg.us/insights/2023/march-2023-economic-compass.html
- https://www.nar.realtor/research-and-statistics/housing-statistics/
- https://www.corelogic.com/intelligence/u-s-home-price-insights/
- https://www.zillow.com/research/daily-market-pulse-26666/
- https://www.fhfa.gov/DataTools/Downloads/Pages/House-Price-Index.aspx
- https://www.investopedia.com/personal-finance/how-millennials-are-changing-housing-market
