Lawrence Yun, chief economist for the National Association of Realtors (NAR), says that although high mortgage rates, slow home sales, and high inflation have had a significant negative impact on the housing industry, it is unlikely that these problems will result in a decline in home prices in 2019.
In fact, Yun noted, even if mortgage rates remain at or close to 7%, we might see a further increase in home prices in 2023.
Yun, who examined the home market’s current position, provided his market forecast for 2023 on Friday at the NAR conference in Orlando.
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Home prices are staying the same throughout the majority of the nation because there is so little inventory, according to Yun. “Some locations are witnessing price increases, while some are seeing price declines, most notably in California.”
While the unusual increase in mortgage rates reduced demand from purchasers, it has also discouraged homeowners from putting their houses on the market in a challenging market. As a result, most markets have continued to have low levels of purchasing inventories.
“The median income needed to buy a typical home has risen to $88,300 — that’s almost $40,000 more than it was prior to the start of the pandemic, back in 2019,” Lawrence Yun, chief economist at the NAR, said in a statement. via @MarketWatch #NARQuarterly https://t.co/Wa2LWXlyt9
— NAR Research (@NAR_Research) November 12, 2022
According to Yun, the housing market is fundamentally different now than it was during the Great Recession. As a result, it’s doubtful that the number of foreclosed homes on the market will significantly grow or that home prices would drop as a result in the near future.
Housing inventory is just about 25% of what it was in 2008, according to Yun. Only 2% of transactions are of distressed properties, which is a far cry from the 30% figure witnessed during the housing meltdown. Because of the recent, large price increases, short sales are practically impossible.
Additionally, Yun said there are indications that mortgage rates have reached a peak at 7%. The October consumer price index is one such instance, which demonstrated that inflation is rising more slowly than anticipated.
Although Yun anticipates a 1% rise in the national median home price the next year, he pointed out that some markets will see price increases while others will see price decreases.
Additionally, Yun anticipates a 7% drop in home sales in 2023. He projects a 10% increase in home sales and a 5% increase in the country’s median home price for 2024, which will lead to a significant resurgence in home sales.
NAR Chief Economist Lawrence Yun analyzed the current state of the residential real estate market and shared his 2023 outlook at 2022 NAR NXT, The Realtor® Experience, in Orlando, Florida. https://t.co/xxIF1hpqHm #NAR NXT
— National Association of REALTORS® (@nardotrealtor) November 11, 2022
Although the view for 2023 was generally favourable, Yun did voice worry about the difference between mortgage rates and the federal funds rate.
The difference between the 30-year fixed mortgage rate and the rate at which the government borrows money is substantially wider now than it has ever been, according to Yun.
“Mortgage rates would be 5.8% instead of 7% if we didn’t have this wide disparity. The economy would reenergize with a typical spread. If inflation stops, the financial markets would be less tense, and lower interest rates would make it easier for property owners to refinance.
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He added that the nation’s overall economic performance has been significantly impacted by this year’s housing market slump.
“The decline in sales and residential construction has [decreased] GDP,” Yun said. “GDP would be positive if the housing market was stabilising rather than decreasing.”
Other predictions anticipate a decline in home sales in 2023, including one from Goldman Sachs, whose experts anticipate home prices to drop by 5% to 10% in 2019.
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