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Have Prices Reached Their Peak?



After the past two years of spectacular price appreciation, it seems the housing market has finally peaked. In fact, since May of 2022, $1.5 trillion of those record amounts of home equity have simply vanished. For the average borrower, this means a loss of $30,000 in equity.

According to sources quoted by several news outlets, prices are likely to drop further, but not as much as they did during the housing bust-mostly because the 2008/2009 drop in prices was due to a push from sellers and came at a time when inventory of homes for sale was four times higher than it is right now. Since the current inventory is so low, competition is still keeping prices "relatively" strong.


What the experts say


Dallas Federal Reserve


A Dallas Federal Reserve Economist, Enrique Martínez-García, said, "The Federal Reserve risks crushing demand for housing as it hikes interest rates aggressively in a bid to tame inflation." Published in Business Insider, the study predicts rising mortgage rates could lead to US home prices falling by 15% and 20%.


CNN


"I would be surprised to see prices anywhere drop below where they were in 2019," said Jeff Tucker, a senior economist from the online real estate database Zillow. "There was some overheating in the housing market in 2021 through this spring that pushed prices higher than what the fundamentals would support. Now they are coming down."

Tucker also suggests that news for the northeast may be less bleak than for the west as "prices will decline by more in the West and there will be a smaller decline in the Southeast." This is because the price drops will be more dramatic in markets that experienced larger gains during the pandemic, many of them in the West and Sunbelt, including cities like Austin, Phoenix, and Boise.


NY Post and MSN


Ian Shepherdson, the chief economist at Pantheon Macroeconomics, hypothesizes "that mortgage rates appear to have stabilized — a welcome sign for homebuilders and buyers alike."


"The good news for homebuilders is that a floor is coming," Pantheon economist Kieran Clancy said in a note. "Mortgage rates have peaked, suggesting that demand will flatten in the months ahead, albeit at an extremely depressed level. Accordingly, we expect housing starts and sales to bottom out early next year, even as the decline in home prices accelerates."






US Housing Crash: Mortgage Rates Could Crash Prices 20%, Fed Study Says (businessinsider.com)

Here's how much equity US homeowners have lost since May (msn.com)

Why the 'floor is coming' for US housing market: economist (nypost.com)

Home prices are finally falling. But how low will they go? | CNN Business

Here's how much equity US homeowners have lost since May (msn.com)


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