Three Things to Monitor as the Real Estate Market Shifts

Could home prices fall by “double-digits”?

Since June, home sales and new construction have dipped, notes an article at Fortune, and August numbers indicate that the housing market has entered a new stage: falling home prices.

“The longer that rates stay elevated, our view is that housing is going to continue to feel it and have this reset mode,” says Rick Palacios Jr., head of research at John Burns Real Estate Consulting.  “And the affordability resetting mechanism that has to happen is on home prices.  And so there are a lot of markets across the country where we’re forecasting that home prices are going to fall double-digits.”

Here are three things expected to unfold as the housing market continues to evolve:

·        More price drops.  Many regions of the country note falling home prices.  According to John Burns Real Estate Consulting, of the 148 markets they track, 98 have had price drops.  Moody’s analytics believes prices could fall 5% from their peak—perhaps twice that in some areas--while Zillow says 62% of markets will experience declining home values by 2022’s third quarter.

·        Other industries will feel the effects of the housing market downturn.  As fewer homes sell, there is lesser demand for appliances, furnishings, paint, and a host of other products and services.  This decreased consumer spending could possibly help wrangle “runaway inflation.”

·        Sellers will hold tight as buyers resist making large dollar purchases.  Instead of settling for a lesser sales price, “some sellers are simply waiting out the housing downturn.”  Further, most homeowners have locked in interest rates below 5% on their current homes, and don’t want to give up their existing lower rates in a move-up home purchase.

Have you seen any of these conditions in your area?

Post authored by Lora Bray.

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