The housing market over the past few years has been nothing short of crazy over the past decade. Earlier this month, Lance Lambert noted, “The U.S. housing market is no exception. The streak of 124 consecutive months of positive home price growth, a period spanning from the bottom of the previous bust in February 2012 to the top of the Pandemic Housing Boom in June 2022, has been replaced by a new streak: four consecutive months of U.S. home price declines.
Between June and October 2022, U.S. home prices as measured by the Case-Shiller National Home Price Index fell 2.4%. On the one hand, that’s already big enough to count as the second-biggest home price correction of the post-WWII era. On the other, it’s mild compared to the once-in-a-lifetime 26% correction that occurred between 2007 and 2012.”
While experts are torn, we do know one thing; everyone’s asking the same question. Is the market going to continue to be a seller’s market or will houses soon go on sale as mortgage rates continue to climb upward?
That’s where things get really interesting.
Goldman Sachs, for example, has taken a bearish view toward rising home prices continuing. Their analysts wrote, “Our 2023 revised forecast primarily reflects our view that interest rates will remain at elevated levels longer than currently priced in, with 10-year Treasury yields peaking in 2023 Q3,” Goldman Sachs strategists wrote, according to the New York Post. “As a result, we are raising our forecast for the 30-year fixed mortgage rate to 6.5% for year-end 2023 (representing a 30 bp increase from our prior expectation).”
In 2022, mortgage rates jumped from 3% to 6%.”
The investment firm noted that they think four markets will likely crash soon. “This [national] decline should be small enough as to avoid broad mortgage credit stress, with a sharp increase in foreclosures nationwide seeming unlikely,” Goldman Sachs wrote. “That said, overheated housing markets in the Southwest and Pacific coast, such as San Jose MSA, Austin MSA, Phoenix MSA, and San Diego MSA will likely grapple with peak-to-trough declines of over 25%, presenting localized risk of higher delinquencies for mortgages originated in 2022 or late 2021.”
Zillow, on the other hand, thinks that overall things will stay flat rather than the bottom falling out and expects even the worst markets to drop only in the single digits.
Fortune writes, “The relatively bullish crowd includes Zillow. The latest housing forecast produced by Zillow economists has U.S. home values falling just 1.1% between November 2022 and November 2023.
Among the 897 markets Zillow measured, it expects 658 markets to see falling home prices between November 2022 and November 2023. That includes markets like San Jose (-7.2% projection); Grand Forks, N.D. (-6.7%); Odessa, Tex. (-6.4%); San Francisco (-6.1%); and Santa Rosa, Calif. (-5.3%).
Meanwhile, Zillow expects 239 markets to see positive or flat home price growth between November 2022 and November 2023. That includes markets like Atlantic City, N.J. (+4.2% projection); Homosassa Springs, Fla. (+4.2%); and Yuma, Ariz. (+3.7%).
“Mortgage rates cresting above 7% combined with normal seasonal trends to put the housing market in a deep freeze this November, sending prices down slightly while further depressing sales volumes. But substantial declines in mortgage rates [down to 6.15% as of Thursday]…and promising data showing a decline in inflation, all give grounds for cautious optimism that the worst is behind us when it comes to borrowing costs, and some of the deterred homebuying demand from this fall may return in the new year. That possibility, coupled with still-low inventory by historical standards, provides the basis for Zillow’s forecast continuing to rule out the possibility of double-digit price declines in 2023 for the nation as a whole,” wrote Zillow economists in December.”
If we are heading into a recession, Forbes offered some excellent reasons to buy a home still. They said that you’re less likely to get into a bidding war as the market slows down, noting that you’re less likely to be forced into paying above the asking price for a home, giving you more time to choose what’s best for you without the pressure of competition.
They also noted that the increase in mortgage rates may give you heartburn now but that you can always refinance in the future. “Rates right now are fairly high. While the national average on a 30-year, fixed-rate mortgage has fallen back below 7% (it’s 6.47% as of Dec. 30, 2022) this number is still far higher than the mortgage interest rates we saw at the beginning of 2022, prior to the Fed’s rate hikes that started in March.
However, we can expect these rates to go back down if the Fed is successful in using them to lower inflation. The Fed has indicated that it intends to raise rates throughout 2023, but after this, there may be the potential to refinance at lower rates.”
Forbes concluded: “Whether or not it’s a good time to buy a home is going to be highly variable, depending on which market you’re shopping, your willingness to sign on to higher rates in the hopes of refinancing in the future, and your short-term employment outlook.
While most Americans hold the vast majority of their wealth in home equity, home ownership isn’t the only way to secure your family’s financial future. You can also invest in the stock market using one of Q.ai’s Investment Kits powered by artificial intelligence, and hedging against these strange economic circumstances with Portfolio Protection. This is also a way to keep your savings for a down payment working while you search for the right deal – this also keeps your money liquid so you can move quickly when the time comes.”
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