According to recent housing reports, the current real estate market in the US is slowing down gradually due to inflated home prices and high interest rates.
According to the Case-Shiller National Home Price Index, house prices in the US have dropped 2.2% between June and September of this year. While prices are still inflated, and interest rates are still high, many housing experts are expecting the market to gradually slow down in the new year.
The National Association of Realtors (NAR), reported that pending home sales have dropped by 4.6% in October 2022 due to potential home buyers being unqualified for mortgages. This has been due to the spikes in interest rates, especially in parts of the country where real estate is more expensive generally.
As reported by Forbes, the NAR reported that October marked the ninth consecutive month that existing home prices fell; sales fell 5.9% between September and October 2022.
“On an annual basis, sales dropped 28.4%, indicating that the higher prices were scaring would-be buyers away from the real estate market. [Forbes]”
According to the Mortgage Bankers Association, mortgage application rates dropped by 1.9%, which is an overall indicator of the current real estate market and economy.
While current home sale prices are dropping, the average pricing for home sales in 2022 have increased by 6.6% for the past year, causing sales to slow down. This is why many experts are expecting a more gradual slowdown of the market, because while certain prices are dropping, the current interest rates and economic conditions are inflating the overall pricing within the market.
Experts are, however, predicting that housing prices will continue to drop in 2023, as many sellers and real estate workers are working to avoid a potential recession. Morgan Stanley recently released further predictions for what the housing market will look like in the coming years.
“The average price of a house could decline by 10% from June 2022 through 2024. While the last housing market correction saw home prices fall 27% between 2006 and 2012, the situation is much different this time, with a resilient labor market and low inventory.”
Redfin, an expert real estate website, expects existing home sales to drop by 16% in 2023 based on the pattern of current homebuyers who are finding the pricing of the market to be unaffordable. Compared to the beginning of the pandemic, interest rates have skyrocketed, which is the main factor in these price inflations.
Redfin also predicted that real estate pricing will drop by 4% in the coming year, bringing the average home price to around $368,000, however, this pricing doesn’t mean that there will be an increase in prospective buyers. Especially compared to 2019 when there was a higher population of individuals looking to move away from their current spaces for the sake of the pandemic.
The biggest thing potential buyers need to be aware of is the state of the economy, and whether or not we will enter a recession in 2023. The market is currently unpredictable, and has been fluctuating greatly within the past few years, so the coming years will likely be no different. It’s mainly dependant on the specific markets one is looking at and the rates in that given space.
Eric Mastrota is a Contributing Editor at The National Digest based in New York. A graduate of SUNY New Paltz, he reports on world news, culture, and lifestyle. You can reach him at firstname.lastname@example.org.