Economists Warn of Impending Drop in Housing Prices
During COVID and as interest rates fell, the demand for housing was high. Sellers were seeing their homes being valued at nearly double what they were in 2019. Now, things are about to get real, according to some economists and industry observers.
Economists and real estate agents around the country are warning that housing costs couldn’t remain that high forever. Experts have said that if there’s a recession, house prices could fall by around 20 percent within the next year. Depending on where you live, you may even see housing prices fall by much more. Some properties, particularly in California, may be overvalued by as much as 72 percent.
You can look at your home’s market value right now on some real estate aggregator websites and take a screenshot because it may be the most your home will be worth for the foreseeable future.
The chief economist at Moody’s Analytics has repeatedly been pessimistic about the housing market. And now, his forecasts are even bleaker, according to reports by Fortune magazine. All of this is happening while economists argue about whether the United States is already in a recession or if we are simply headed that way. The Fed may be increasing interest rates to prevent a recession, but the reality is that those rising rates are only creating further devastation to the housing market. After all, who wants to buy a home with a 30-year fixed rate of 8.5 percent or higher?
There are quite a few housing markets where there has been a bubble…Charlotte, NC; Boise, ID; and Austin, TX are some of the most overvalued markets. People may have purchased a home in some of these bubbles where they paid $100,000 more than what the home is actually worth, and some industry experts believe that bubble is about to pop. It will lead to negative equity, and that’s when more people are likely to stop making payments and undergo foreclosure.
According to Moody’s, the housing bubble is going to pop very soon thanks to all of the decisions made by the current administration in Washington, D.C.
As the Daily Mail reports, the interest hikes being made by the Fed are expected to plunge the U.S. into recession and will also likely lower the cost of property as it becomes too expensive for many to get a mortgage, thus cratering demand.
The housing inventory is the highest it has been since 2009, and sellers will only struggle more to sell their properties because homebuyers are hesitant to get a mortgage in today’s economic climate. Everyone will be affected in one way or another, and it’s unlikely to get better in the next quarter.