The housing market has been on a roll during the COVID-19 pandemic, even during the most difficult times. However, according to Goldman Sachs, home prices in the United States are expected to drop by 5 to 10% over the next year. This could be due to a collective “Hold My Beer” moment from the Federal Reserve and other banks and governments, who have spent 13 trillion dollars to combat the economic recession caused by the pandemic. Overall economic stability also plays a major role in predicting future trends.
Even with the official announcement that the pandemic is over, this could have a negative impact on the housing market. For instance, if everyone returns to work and offices open with full force in cities across the country, what will happen to all the suburban and rural areas that were stuck during the pandemic? It is possible that there could be a quick sale in these areas, which were once a very popular market. Current trends in the real estate market show that buyers are still interested, which keeps the market somewhat competitive, especially for attractive and reasonably priced homes. Pressure will remain on home price growth until the end of the year, and house prices will continue to rise due to a mismatch between supply and demand.
Rising interest rates will reduce demand for housing by reducing affordability, but this is expected to attract more sellers who want to take advantage of favourable market conditions, which will result in increased competition and a rebalancing of the housing market. This year, Wells Fargo anticipates significant declines in sales of new homes (-10.5%), sales of existing homes (-7.4%), construction of single-family homes (-7.3%) and real estate GDP (-10.1%). As a result of rising mortgage rates, home values in about two-thirds of the country's major housing markets decreased over the summer months. Home prices have risen so drastically that many potential buyers, particularly millennials, have been left out of the market. Current trends and forecasts for the next 12 to 24 months clearly indicate that the housing market will most likely experience an increase in housing prices. While it is impossible to predict with certainty whether or not there will be a housing crash in 2023 or 2024, it is important to keep an eye on current trends and forecasts so that you can make an informed decision about your own investments.
