As the US economy faces a potential recession in 2023, many are wondering what will happen to home prices. To get an idea of where home prices could be heading, Fortune summarized all the major real estate forecasts. It's important to note that when a group refers to home prices in the US, they are referring to a national aggregate. Most forecasts predict that home prices will fall between 5% and 10% from peak to minimum, with the official forecast model predicting a 7.6% drop. Credit standards remain tight and affordability is about to worsen, meaning consumers should expect their purchasing power to deteriorate even as house prices fall.
Worsening conditions have already begun to crush buyer demand in the second half of this year, leading desperate sellers to lower their selling prices or withdraw their listings altogether. The sharp decline in home sales, caused by rising interest rates, will continue until next year and will cause the first annual fall in housing market prices in a decade, according to real estate agency Redfin. Other expert predictions point to significant falls of up to 20%. Home prices measured by the Case-Shiller National Home Price Index have already fallen by 2.2% between June and September. Adams predicts average home prices will fall by average percentage points through the middle of next year, with greater declines in technology-focused regions and areas where affordability was most restricted before the correction. This year, home prices hit an all-time high in June and then began to fall as rising mortgage rates drove many would-be homebuyers out of the market.
The housing market exploded during the pandemic, and a combination of low mortgage rates and reduced inventory caused bidding wars among prospective homebuyers, causing prices to gradually skyrocket. Markets such as Phoenix, Las Vegas, Boise and Dallas, which experienced a 30 to 40% increase in home prices after Covid and have a large supply of new homes under construction, are more likely to see prices plummet by approximately 20%, although many markets will face smaller declines. The fall in prices will begin during the first quarter when homeowners closed deals with homes that contracted later this year. This year's rise in mortgage rates has caused an affordability crisis, adding to financial problems for prospective buyers who were already facing high home prices and overwhelming inflation. It's difficult to predict exactly what will happen with home prices in the upcoming recession. However, it's clear that there will be a significant drop in home prices across the US.
Consumers should expect their purchasing power to deteriorate even as house prices fall, and some markets may experience price falls of up to 20%.
