Back in 1981, the New York Times published an article titled “the coming [Housing] The collapse is already here.” The premise of the article was that the Federal Reserve’s fight against inflation, which pushed mortgage rates at a peak of 18%—the nation’s housing bubble was about to burst. In the end, while home sales and housing construction levels plummeted, the predicted housing crash of the 1980s did not manifest.
Fast forward to 2022, where the Fed’s ongoing fight against inflation Once again, people are wondering if a real estate bust is just around the corner. As in 1981, we are seeing increased mortgage rates Push the US real estate market in a sharp slowdown. Year after year, Existing Home Sales Y new home sales they have fallen by 20.2% and 29.6%, respectively.
That Strong contraction in the US real estate market.—something both the National Association of Home Builders and the National Association of Realtors call “housing recession”— has analysts lowering their 2023 home price forecasts. Yet we have yet to see a research firm predict a nationwide housing crash, something industry insiders say would require a decline peak to trough greater than 20%.
And while Zillow Nationwide house price growth is expected to slow to 1.4%, will vary significantly by market. Let’s take a deeper look.
Back in July Zillow economists predicted that only five regional housing markets were prepared to feel falling home values during the next year. Then in August Zillow economists revised that tally to 123 regional markets..
This week, Zillow economists updated that forecast. They now predict that 259 of the country’s 896 regional housing markets are likely to see home value declines between August 2022 and August 2023. Of those, four markets are forecast to see home value declines greater than – 5%. That list includes Fairbanks (-7% expected decline); Lake Charles, Louisiana (-6.1%); Minot, North Dakota (–6%); and Mount Gay, West Virginia (-5.1% decline).
However, Zillow still predicts that the vast majority of regional housing markets will see increased home values in 2023. In total, Zillow forecasts that 615 markets are poised to see higher home prices over the next year. Another 22 markets are forecast to remain flat.
While Zillow predicts that home values in most markets will rise over the next 12 months, it doesn’t see much growth in the remaining months of 2022. In fact, over the next three months (see map above), Zillow predicts that home values will fall in 552 markets. Why? This summer, About two-thirds of the nation’s largest housing markets saw home values drop in the face of rising mortgage rates. As we speak, the economic impact of higher mortgage rates continues to erode some of the gains made this spring.
“Our view is that you will see, and we are seeing it right now, home prices will fall even though supply levels are not increasing. And I think that’s an interesting thing that’s starting to surprise a lot of people now,” says Rick Palacios Jr., head of research at John Burns Real Estate Consulting. Fortune.
Let’s be clear: there is no consensus when it comes to housing forecasts for 2023. Companies like CoreLogic, fannie mae, freddy mac, and Zillow continue to forecast positive house price growth over the next year. Meanwhile, firms such as John Burns Real Estate Consulting, Zonda, Capital Economics, Moody’s Analytics and Zelman & Associates are predicting a drop in home prices over the next year.