What 18 Top Economists Say About US Home Values in the Months to Come

  High interest rates and historically low inventory have plummeted buyer demand to the lowest levels in 22 years according to recent data from MBA. With home values continuing to reach all time highs even in the face of listing price reductions, both buyers and sellers are left wondering what’s in store for the future of housing appreciation. In order to provide diverse analysis, we’ve rounded up quotes from the top economists in the country. If you’re just wanting the TLDR (too long; didn’t read), their reactions could be summarized like this: barring a few outliers, most economists project home values nationwide to continue to increase, but at a much slower rate than 2021 and early 2022. Let’s take a look at what their thoughts are in regards to home values in the coming months.     Mark Zandi, chief economist at Moody’s “Home prices will go flat nationwide, [along with] price decline in the most juiced markets in the South and West.” In a recent CNBC interview, Zandi says we’re nowhere near risking any crash like in 2008, due to inventory being at a record low. “This is the exact opposite of the situation during the 2007-2008 housing bubble when vacancy rates were at a record high. Building supply will increase as supply chain issues iron out. Inflation has peaked [and] will be meaningfully moderating by this time next year.” Will home prices fall in the coming year? No, according to Zandi. Instead, he predicts a "housing correction," with, at most, 5% to 10% price reductions in more “overvalued” housing markets like Boise and Charlotte. The TLDR: Unlike in 2007-2008, low inventory will prevent prices from falling.     Lawrence Yun, chief economist & senior V.P. National Association of Realtors “Home value appreciation will start to slow down.” Pointing to the recent five-month drop in the amount of pending home sales, Yun projects that the current high mortgage rates will continue to slow the housing market. In a June 3rd, CSPAN interview, Yun stated that “mortgage rates may be topping out right now.” Additionally, “home prices are rising 20% at a time when incomes are only rising 5%. That’s not sustainable. So some degree of calming is to be expected.” Which market is currently the hottest? According to Yun, “the Rocky Mountain time zone area. Super hot. Along with southern states.” The TLDR: Home prices won’t be rising as much in the coming months.     Daryl Fairweather, chief economist at Redfin “I don’t think home prices will go down.” Quoted May 31 in Marketwatch, Fairweather shared the sentiment of many economists who believe that home prices will not be dropping. In fact, in a recent Pulsenomics survey, only 20% of the economists questioned think home prices could decline over the next five years. In fact, she says that popular Sun Belt communities will likely experience continued price growth. However “buyers in markets like Los Angeles, San Francisco, Boston and Seattle who have lost out on several bidding wars may find they’re facing less competition from other buyers than they were a month or two ago.” Additionally, they may be “relieved to know that the double-digit year over year price growth we’ve been experiencing is likely to drop into the single digits in the coming months.” The TLDR: Home prices won’t drop, but the rate of increase will be slower.     Nadia Evangelou, economist and director of forecasting at the National Association of Realtors “I believe the housing market will continue to outperform compared to pre-pandemic.” In a June 9th Twitter post, Evangelou tweeted: “Although mortgage rates will continue to rise in 2022, don’t expect to see the same sharp increases that the market experienced in March and April. Mortgage rates will likely average 5.6-5.7% by late 2022.” Still, “housing demand should slow down due to weak affordability.” Though home sales have declined in the last three months, “due to seasonality trends, I believe the housing market will continue to outperform compared to pre-pandemic. Keep in mind that June is traditionally the busiest month for the real estate market,” she concluded in a June 6 interview on Bankrate.com The TLDR: Housing demand will slow, but home values will continue to rise.     Enrique Martínez-García, senior research economist at the Federal Reserve Bank of Dallas “The continued mismatch between housing demand and supply makes it unlikely that slowing would actually cause home prices to drop over the coming year.” Though Martínez-García made headlines for telling Fortune, “This might be a housing bubble,” he proceeded to walk back the dire prediction in later statements indicating that high demand and low inventory would keep housing prices from crashing or even dropping. Adding that he expects home prices to realistically continue to rise slightly over the next 12 months. The TLDR: Home values will continue to rise.     Selma Hepp, deputy chief economic for CoreLogic “The market will continue to see relatively strong demand from buyers and an elevated rate of home price growth, despite slowing notably from ultra-hot early spring 2022 conditions” Earlier this week, Hepp told Bankrate that home values will continue to appreciate while demand remains strong. In fact, a recent forecast from Corelogic projected that home prices will continue to increase 1.2% on a month over month basis, but “annual U.S. home price gains are forecast to slow to 5.6% [year-over-year] by April 2023 as rising mortgage rates and affordability challenges impede buyer demand.”   The TLDR: Home values will rise.     Greg McBride, chief financial analyst for Bankrate.com “We will still see home price levels that are 15 to 20 percent above what a home would’ve sold for six to 12 months ago.” Noting supply issues and cooling demand, McBride stated, “while the market is cooling, prices are not necessarily dropping.” He reiterated the thoughts of many others: That even as “demand is falling off sharply due to soaring prices and higher mortgage rates” low inventory and buyer demand that still continues to outpace that inventory will keep prices rising even as demand and inventory begin to moderate.  The TLDR: Demand is decreasing, but prices won’t drop.     Ken Johnson, economist at Florida Atlantic University “If we’re not at the peak of the current housing cycle, we’re awfully close.” Some are saying those Rocky Mountain time zone regions that, earlier in this article, Lawrence Yun had indicated as being the “hottest,” may be overvalued. Ken Johnson says the Denver and Colorado Springs markets may be overvalued. “Recent buyers in many of these cities may have to endure stagnant or falling home values while the market settles – and that’s not what they want to hear if they had planned to resell anytime soon.” He projects that there may be a slow down, especially in these regions. “Near-record-low mortgage rates helped fuel demand for housing, especially during the pandemic, and the competition for homes pushed prices higher,” he said. “But now the Federal Reserve is raising rates to curtail inflation, and already that’s cooling demand.” The TLDR: Home values may flatten and even fall in overvalued markets like Denver and Colorado Springs.     George Ratiu, senior economist and manager of economic research for realtor.com “While sellers are expected to hold the upper hand in 2022, navigating the listing process remains a challenge.” Discussing the trend of sellers planning to list their homes at the end of summer, Ratiu says “many buyers remain interested in finding a home. At the same time, recent housing trends suggest demand is beginning to moderate as higher mortgage rates push monthly payments out of some buyers' budgets, underscoring the long-term need for more affordable inventory." It’s important, Ratiu says, for sellers to be aware of “market conditions, prices and seasonal trends” as demand won’t be as booming as it was prior to the interest rate hike. The TLDR: Home values will moderate. Marketing will be more important.     Ed Pinto, director, American Enterprise Institute’s Housing Center “We’re seeing a big migration from pricy markets such as San Jose or New York to Charlotte, Boise, or Phoenix.” In a June 6 interview with Shawn Tully, Pinto says “we’ve seen a 33% increase in the price of similar homes since January of 2020 that has no precedent in recent history. But the fall from 17.3% to 14.2% appreciation is enough of a change to call an inflection point. That inflection point marks a major reversal, the start of falling HPA in future months.” Still, he says a seller’s market will remain for now, adding it would take a rate hike of 6-7% to majorly cool the market. Referencing the work-from-home revolution that has led to populations leaving extensive coastal metros, Pinto says “That housing arbitrage opportunity is driving up prices in the mid-to high end on the inexpensive markets. And that trend has staying power.”   The TLDR: Home values will continue to increase, more-so in previously inexpensive markets.     Len Kiefer, deputy chief economist at Freddie Mac “The U.S. housing market is at the beginning stages of the most significant contraction in activity since 2006." In a recent tweet, Kiefer expresses concern about how the rate of “mortgage applications are pointing to a large decline over summer.” Adding that “purchase apps [are] down 40% from seasonally adjusted peak.” Further, he explains, “during COVID in spring of 2020, applications also fell 40% but came roaring back in short order. Such a rebound is unlikely in the current environment. But neither is the very very slow recovery we saw in 2011.” Additionally, this contraction is unlikely to result in decreasing home values. Freddie Mac projects home prices will continue to grow 2.2% in Q3 with the rate dropping slightly to 1% appreciation by the time we get to Q2 in 2023.    The TLDR: Home values will continue to increase.     Douglas Duncan, chief economist at Fannie Mae “Home sales will slow meaningfully through the rest of this year and into next.” Citing a recent survey showing record-high pessimism from would-be homebuyers about mortgage rates and high home prices, Duncan projects these factors “will likely continue to squeeze would-be homebuyers” and dissuade potential sellers who want to hold onto their low mortgage rate. Fannie Mae’s forecasting indicates that this combination of reduced demand and reduced inventory will result in housing prices continuing to rise through Q2 of 2023 though at a slower rate than previous months. By Q4 of 2023, values will still be appreciating 5.4% month-over-month according to Fannie Mae’s projections.   The TLDR: Despite (or perhaps even because of) conflicting economic factors, home values will continue to increase.     Nicole Bachaud, economist at Zillow "Unlike in 2006, this market is underpinned by strong fundamentals and has been built on mortgages with sound credit, factors that won't change in the near term." Responding to the results of a recent Zillow survey that found nearly 60% of the more than 100 housing experts believe the housing market is not currently in a bubble, Bachaud stated "Americans have seen home values rise at record rates over the past few years. But although a recession is looking more and more likely, the housing market today is a far different beast than what we saw in the mid-2000s.” Since most of the experts polled believe that a recession will begin in either 2022 or 2023, Bachaud added that such an event would likely strengthen consumer’s real estate. Housing, she adds, has historically enjoyed “relative stability as an asset.” The TLDR: Home values will continue to increase.     Andy Walden, economist at Black Knight “Low inventory provides a backstop for home prices.” In a June 1 CNBC interview, Walden says: “We could still see significant pullback. There are still major headwinds there for the purchase market. One of them is rising interest rates and the fact that they’ve now driven the lowest level of home affordability that we’ve seen since 2006. And the second is that we still have only one third the level of housing inventory than what we traditionally should.” Lack of affordability and inventory continue to put downward pressure on the housing market. That will likely carry through the summer months. Though sales activity will decline, Walden insists there will not be a drop in prices. The TLDR: Home values will not decline.     Ali Wolf, chief economist at Zonda “While demand has softened, there are still more buyers than sellers given the acute lack of inventory.” In a June 8th tweet, Ali Wolf expressed surprise at a certain finding in the Pulsenomics survey. “I'm sure I'll get some flak for this,” she said. “But I'm utterly shocked that only 20% of economists in the Pulsenomics survey think home prices could turn negative over the next FIVE years.” Such sentiment indicates she suspects values might drop in that time period. Her statements in a recent Fortune interview, however, are more tempered. Due to the low ratio of inventory to potential purchasers “the shift that we're seeing so far isn't catastrophic.” The TLDR: Mixed, bordering on pessimistic for home values in the next 5 years.     Danielle Hale, chief economist at Realtor.com “...market conditions continue to favor sellers.” “Today’s data offer a hint of relief on the horizon, though a very distant one,” Hale says in an interview for Marketwatch. “With more options, home shoppers may see a bit more negotiating room and time to make decisions.” In her weekly housing trends report for Realtor.com, Hale noted “The median listing price grew by 16.9 percent over last year.” Additionally, “the typical home asking price is still advancing about three times faster than it would in a normal market, so it will take much more inventory to see a meaningful slow down in home price growth.” The TLDR: Home values will rise unless a great deal of new inventory suddenly enters the market.     Ian Shepherdson, chief US economist at Pantheon Macroeconomics "The housing market is in the early stages of a substantial downshift in activity, which will trigger a steep decline in the rate of increase of home prices, starting perhaps as soon as the spring," Shepherdson told Business Insider. Shepherdson projects monthly sales to total 4.5 million by the end of the summer, down 1.5 million from February sales. “Prices recently have increased much faster than implied by the inventory numbers, perhaps because the shortage of inventory of existing homes has pushed up demand for new properties, [but now] they are starting to correct. This process has much further to run." Shepherdson goes on to predict that home values are vulnerable to decline in the coming months, but this drop will not be drawn-out. Rather, it would look more like a dip as consumers and sellers adjust to the shifting dynamics.    The TLDR: A possibility for a near-term drop in value.     Logan Mohtashami, lead analyst for HousingWire "Everyone should embrace higher rates to cool off this madness, and hope inventory rises.” Criticizing the “savagely unhealthy” housing market, Motashami says it’s unlikely there will be price drops anytime soon. In order for home values to decline, Mohtashami wrote on HousingWire that “key data lines that need to happen first: monthly supply data getting over four months with some duration and total inventory levels getting back into a range of 1.52 -1.93 million. Until that happens, don’t look for anything big in terms of price declines as total inventory and a monthly supply of homes are just still too low.” The TLDR: Home values will be unlikely to drop.   What's It All Mean? Although shifts are happening in the housing market, most economists project that values will continue to grow but not at the previous ultra-high rates. Even the few detractors who spoke of price drops, admitted that the present low inventory would reduce the likelihood of long-term value declines.

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The Road to Homeownership

The housing market was red hot for months. Mortgage rates were low, and the competition for homes was fierce, with many people paying far above the asking price. Buyers were snapping up homes within hours of being listed, leaving many frustrated in their search. Usually, low-interest rates signal that it’s prime time to buy, but in 2021, the rates exacerbated the intense competition, and other factors made the housing market tough, particularly for millennial buyers. Many in this group have been waiting to purchase their own home for years,  only to be delayed by factors such as savings, low housing inventory, and COVID.  Some of these buyers may find relief in the current changing market conditions. Rising interest rates, a larger level of inventory, and a slower sales pace mean that this summer may be a good time to finally buy.      Interest Rates Mortgage interest rates were quite low over the past two years, meaning buyers who could close on a house saved a significant amount of money, both in monthly mortgage payments and over the length of the loan. These low rates led to the incredibly competitive rush to buy that occurred in 2020 and 2021.  But since the last quarter of 2021, mortgage rates have risen quickly. In May 2022, the average rate for a 30-year, fixed-rate mortgage was 5.25%. For the two previous years, that rate was around 3%. Today, that rate is up to over 6%. Rising interest rates may discourage some buyers, but in reality, the rates are still historically low. And the fact that the rates are turning off some prospective buyers means those in the market to buy have a better chance of securing the homes they really want.     Home Inventory In the last two years of this sizzling hot real estate market, the low housing inventory made purchasing a home difficult for many prospective buyers. More people could afford to buy due to the low rates, but finding a home and winning the bidding war for it was quite difficult. Many listed homes received multiple offers in a matter of minutes. It’s been a clear seller’s market. They had most of the power and were able to set conditions that were favorable to them. Potential buyers were routinely offering amounts way above the asking price, which made it impossible for those on a stricter budget to put in winning offers. Fortunately, home inventory is slowly rising, so more potential buyers will be able to find the homes that they want and actually close on them. You shouldn't have to make a snap decision about making an offer or outbid four other anxious buyers either.     Price Cuts Since experts agree that the housing market is slowing down, you can expect to see some price cuts in homes rather than rapidly increasing prices. In 2021, home prices rose by 18.8%. It was a strong seller’s market, and buyers had to pay the price if they wanted to secure a home. Since interest rates and home inventory are now rising, sellers are losing some of their power. In fact, the percentage of price cuts in May 2022 was 10.5 in contrast to 6.2 in May 2021.  Is it now a buyer’s market? Not exactly. Prices are still high, and the situation remains competitive. But for buyers, especially millennials, who have been edged out of the market for years, now may be a good time to re-enter the market and try to purchase your own home.    We're Here to Help  The real estate market can always be challenging, no matter the current interest rate or home inventory levels. We're here to help you navigate the changing market. We'd love to talk about your goals and how we may be able to help. Click Here

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Expert Forecast: Predictions for the Rest of the 2022 Real Estate Market

Seldom have rising interest rates been seen as beneficial in real estate circles. But in the current seller's market, higher mortgage financing rates are viewed as a potential antidote to runaway price appreciation in many markets across the country. However, few, if any, experts believe that rate increases will substantially reduce the current demand, nor can higher rates be expected to affect sales numbers to any great extent, at least for the second half of this year.  Higher prices and an increasingly short supply of homes have caused some buyers to be effectively priced out of the market. The concurrent increase in rental prices only serves to accentuate the problem. Viewed as a wise move by the Fed, real estate experts hope that higher interest rates will help balance demand and regulate prices in the coming months. Real estate professionals and potential buyers and sellers alike will certainly be watching with bated breath.  Rates have risen more quickly than predicted, which is a sign that affordability will continue to be diminished because supply cannot keep up with current demand. However, real estate predictions do not anticipate a meltdown, nor do forecasters anticipate that a crash is on the horizon.    Statistics Tell the Story New construction has not yet completely recovered from the Great Recession due to a diminished labor pool and the inflated cost of materials. The past two years of the pandemic also influenced the housing market. Now, all indications are that the availability of housing -- both new builds and new listings -- will increase during the remainder of 2022. Still, that demand will almost certainly outpace supply not only this year but into 2023 as well. It may continue beyond next year.   Let's look at past statistics:  According to the February 2022 Monthly Housing Market Trends Report by Realtor.com, the median listing price for active listings was $392,000, representing a 12.9% increase compared to 2021 and up 26.6% from February 2020. By most measures, 2021 was a banner year for home sales.  The number of homes on the market declined by almost 180,000 in 2021, and total inventory decreased by nearly 27% compared to 2020.  Today, leading real estate forecasters, notably Zillow, have issued new estimates for 2022, noting that the 16.4% projected growth rate may have been high. Zillow's latest prediction is for a 14.9% growth rate, with 6.09 million sales, down only one-half percentage point from 2021. Key factors -- Low inventory, quick sales, and rising prices -- are all cited by leading analysts, and the expectation is that all will continue at least until 2023.   Has the American Dream Faded? Although the American Dream of putting down roots in a home of your own may seem a little more difficult than it once was, it's also a fact that the real estate market is reasonably healthy today and will continue to be strong. No one is predicting a crash. Because the meltdown of a decade ago is still top of mind for some, that's the good news of the 2022 real estate forecast.  However, one bit of bad news, according to knowledgeable analysts, is that an increase in foreclosures is almost certain as the moratorium is lifted. Post-pandemic economic reality and a rising cost of living will mean increasingly tighter budgets for all but the nation's upper-income homeowners.  The housing market should remain strong and stable for at least the next five years, according to Kathy Fettke, co-founder of RealWealth. She notes that changing demographics will affect the various housing market segments in different ways. A population shift from cities to suburbs and smaller towns, she says, opens pockets of opportunity in densely populated areas for investors. Still, suburbs and smaller towns are likely to become less affordable for buyers, especially if the seller's market continues into 2023. Inflation and higher cost of living mean that more people will continue to rent, even though rental prices are high and will become higher, says Fettke. She also predicts that more people must choose to work remotely to lower their expenses. This expert also sees an inevitable tightening of mortgage loan requirements and perhaps more interest in adjustable-rate loans. Finally, she rounds out her real estate predictions by noting that she anticipates no real change to the current federal tax structure until after the November elections.    Whether you want to sell your existing home, buy your first home, upsize, downsize, purchase a vacation home, or just talk about options, a real estate professional is your best source for information based on current trends in our area. If you're interested in learning more about the 2022 real estate forecast, don't hesitate to reach out - we're happy to help. Click Here

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