US housing market crash: In 2023, it is expected that existing home prices would decline by roughly 5% nationwide and by as much as 10% or more in both expensive areas and areas where home values have increased the most.
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What happened in the US housing market 2022?
The Pending Home Sales Index, which is based on contracts that have been signed, according to the National Association of Realtors (NAR), dropped by 4% to 73.9 months of November from a downwardly revised 77.0 in October. Aside from the brief decline during the early months of the pandemic, November’s value was the lowest since NAR introduced the index in 2001.
According to the National Association of Realtors (NAR), the median existing-home sales price was $379,100 in October, up 6.6% from a year earlier but down from the record high of $413,800 in June. The Mortgage Bankers Association (MBA) reports that mortgage applications are at their lowest level in 25 years, reflecting the impact that rising housing costs have had on home buyers.
As home buyers were “squeezed out of qualifying for a mortgage,” according to Lawrence Yun, chief economist for the National Association of Realtors. Total existing-home sales decreased 5.9% from September to October, marking the ninth consecutive month of dropping sales.
U.S. Housing Supply and Demand
U.S. Housing Supply
There were 1,516,911 houses offered for sale in the US in November 2022, an increase of 8.3% from the previous month. There were 361,304 newly listed residences, a decrease of 25.7% from the previous year. The median days on the market was 37, an increase of 15% from the previous year. Three months are supplied on average, which is an increase of one year.
U.S. Housing Demand
In November 2022, 26.4% of homes in the US sold for less than the list price, a 17.9-point decrease from the previous month. Only 20.8% of properties had price decreases, up from 9.0% of homes in November of the previous year. The sale-to-list price was 98.5%, which is 2.2 points lower than last year.
Impact of FED interest rate on the housing market
The Fed’s aggressive interest rate increases, which are intended to lower high inflation by reducing demand in the economy. It had a particularly negative impact on the housing market. According to the Fed’s favored metric, inflation is still approaching its 2% target and has risen earlier in 2022 at its highest rate in 40 years.
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The Fed increased rates by half a percentage point this month, capping a year that saw its benchmark rate grow at the fastest rate since the early 1980s, from nearly zero in March to between 4.25% and 4.5% presently. In 2023, rates, according to Fed experts, will likely reach 5%.
The central bank-induced increase in borrowing costs has been met with immediate response on the housing market. For the first time since 2002, the 30-year fixed mortgage rate exceeded 7% in October 2022, more than tripling in just nine months.
Will the US housing market crash in 2023?
According to Forbs, economists aren’t in agreement as to whether or when the housing market will fall or if the double-digit percentage increases in home prices over the past year would cause it to “correct” itself. Nationally, economists anticipate a 5% decline. Unbelievable as it may seem, prices will likely keep rising in some markets. The likelihood of a housing market collapse is low, according to some analysts who note that homeowners now are in a considerably more secure position than those who were recovering from the 2008 financial crisis.
realestate.usnews.com stated that, in 2023, it is expected that existing home prices would decline by roughly 5% nationwide and by as much as 10% or more in both expensive areas and areas where home values have increased the most. In case of severe recession might cause home prices to drop by 10% nationwide or more.
Rent hikes have been flattening recently after spiking in 2021 and the most of 2022, and are expected to increase by the mid-single digits in 2023. Asking rents may decrease in those markets where rents have increased the greatest since 2020 because the highest number of multifamily units under construction since the early 1970s is anticipated to enter the market in 2023.
Predictions by Ivy Zelman, CEO of Zelman & Associates
Ivy Zelman, CEO of Zelman & Associates, who has long maintained a more realistic outlook on the housing industry, thinks that demand will continue to decline in the US home market as long as mortgage rates stay high. leading ultimately in deeper price savings. Zelman projects a price decline of up to 20% for 2023.
Predictions by KPMG
KPMG, a global consulting business, has lowered its prediction for US housing values. The company predicted that US home values will probably decline 15% from their peak to their bottom in November. However, a slowdown in the tech industry that has resulted in massive layoffs, hiring freezes, and drops in home prices in places with previously strong demand has caused it to further reduce its outlook in the month that has passed.
Three reasons mortgage rates are expected to remain high in 2023
1. The economy’s persistent uncertainty, particularly persistent inflation
2. Investors requesting higher interest rates under the presumption that new mortgages will more likely be refinanced within a few years when rates finally decline
3. The Federal Reserve is still insisting on bringing inflation to 2.0%. In 2023, it’s unlikely that anyone will know if that’s even achievable.
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