Real estate analysts polled by Reuters say U.S. house prices will decline less than expected this year before stagnating in 2024, amid widespread expectations that interest rates will remain high for longer. a long time.
Although the US Federal Reserve has entered its most aggressive tightening cycle in forty years, average house prices have fallen just over 5% from their recent highs, barely more than the 45 % increase recorded during the 19-year-old avian flu pandemic.
Much of this resilience in one of the most interest rate sensitive sectors of the economy can be explained by the stubbornly tight supply of housing, which is not expected to ease for at least the next six months.
According to a May 15-30 poll of 30 real estate analysts, home prices, which started to rise again in March after eight months of decline, will decline an average of 2.8% this calendar year. This is less than the 4.5% decline forecast in March.
Average house prices, as measured by the S&P CoreLogic Case-Shiller Composite Index of 20 metropolitan areas, are expected to stagnate next year.
Projected 9% drop from peak to trough is less than a third of the slump that occurred during the 2007-2008 global financial crisis, leaving prices out of reach for prospective homebuyers .
“Going forward, we think prices can come down a bit further. Affordability remains tight and the weakening economy will weigh on buyer sentiment,” said real estate economist Sam Hall. at the consulting firm Capital Economics.
“Given that supply is expected to remain constrained, property prices may not fall as much as expected.
Rising house prices and high consumer price inflation suggest that the Fed, which raised its benchmark rate from near zero in early 2022 to 5.00-5.25%, will hold it at least until at the end of 2023, which maintains upward pressure on mortgage rates.
The 30-year fixed mortgage rate, currently hovering around 6.7%, is expected to average 6.2% in 2023. It is expected to fall to 5.5% in 2024 as the Fed plans to cut its rate at that time.
These high mortgage rates limit the supply of housing, which puts upward pressure on prices, as well as on demand.
“Although mortgage rates have more than doubled since 2021, homeowners have not been forced to sell because most of them have jobs, and many are reluctant to sell because they have a mortgage. long-term payoff,” said Sal Guatieri, senior economist at BMO Capital Markets.
Existing home sales are currently rising at an annualized rate of 4.28 million units – which is significantly lower than the peak of 6.56 million reached in January 2021 – and are expected to remain at this level.
Just over 70% of respondents, or 16 out of 22, said a significant slowdown was more likely than a rebound in house prices over the rest of the year.
“If the Fed is forced to tighten policy further to contain inflation, the market could resume its fall,” added BMO’s Guatieri.
(For more articles from Reuters Quarterly Housing Market Surveys:)
2023-05-31 10:11:25
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