US home prices could drop by as much as 20% next year

house prices are fell during the second half of 2022 With demand for residential real estate cooling in many states and cities across the US. According to a renowned Wall Street economist, prices could continue to fall by as much as 20% next year as mortgage rates climb and the housing market returns to normal in the wake of the pandemic.

Pantheon Macroeconomics chief economist Ian Shepardson said in a report this week that the decline in demand for homes Mortgage rates rise sharply This is taking a heavy toll on housing prices.

,[W]I expect home sales to continue to fall until early next year. By that time, sales will have fallen to unimpressed minimums, where home-goers are the only people who have no choice because of job or family circumstances,” he said. “In the face of nearly 400 discretionary buyers rapidly disappearing. Huh [basis point] Rate hike in the last one year.”

According to the National Association of Realtors, home sales fell last month to 4.7 million, down 1.5% from August.

Rising interest rates could further tighten supply

Mortgage rates have more than doubled this year. The average rate on a typical 30-year mortgage rose to 6.94% this week, up from 6.92% last week and 3.2% in January. The average rate on a 15-year, fixed-rate mortgage is now 6.23%, compared to 2.33% a year ago.

Rising rates have forced some homeowners to pump the brakes on selling their property because they must obtain a mortgage to buy another home as rates continue to rise.

“It’s entirely possible that people who want to do business will also face large monthly payments,” Shepherdson said. “That’s a good reason to stay, causing supply disruptions.”

The supply of homes available for sale is likely to decrease next year, Shepherdson predicted, while “prices have dropped significantly to restore balance.”

NAR said the median home selling price rose to $384,800 in September, up 8.4% from a year earlier.

Nancy Vanden Houghton, chief US economist at Oxford Economics, said: “We expect a modest increase in inventory over the next month or two as homes remain on the market longer, but new listings continue to decline as sellers continue to grow.” step back.” research note.

How high will the rates go?

Economists expect mortgage rates to continue to rise next year as the Federal Reserve further raises borrowing costs to curb inflation. NAR’s chief economist Lawrence Yoon told a group of real estate investors last week that rates could reach 8.5% “which would be another big blow to the housing market.” Other analysts expect mortgage rates to be in the double digits.

US housing market cools due to hike in mortgage rates


According to Oxford Economics, mortgage rates have increased by about 3.8% since the end of 2021. Wall Street analysts expect the Fed to raise its benchmark interest rate by an additional 1.5% by the end of the year.

“At the beginning of the year, it seemed very unlikely that mortgage rates would rise beyond 6%,” Lisa Sturtevent, chief economist at Bright MLS, told Realtor Magazine. “The question now is, how high will they go? A lot of the answer depends on how aggressive the Federal Reserve is on raising rates in its next two meetings.”

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