{"id":2625,"date":"2023-06-16T13:54:53","date_gmt":"2023-06-16T13:54:53","guid":{"rendered":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/2023\/06\/16\/home-prices-are-finally-falling-how-low-will-they-go\/"},"modified":"2023-06-16T13:54:53","modified_gmt":"2023-06-16T13:54:53","slug":"home-prices-are-finally-falling-how-low-will-they-go","status":"publish","type":"post","link":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/2023\/06\/16\/home-prices-are-finally-falling-how-low-will-they-go\/","title":{"rendered":"Home Prices Are Finally Falling: How Low Will They Go?"},"content":{"rendered":"

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For the past year, real estate experts, pundits, and that guy you sat next to at the bar\/bus\/movies have been saying that home prices are poised to drop after several years of previously unthinkable gains.<\/p>\n

But now that home prices are finally coming down, just how low will they go? That\u2019s the million-dollar question for frustrated homebuyers, worried sellers, and homeowners who would prefer that their home values continue rising.<\/p>\n

On Memorial Day, billionaire Twitter owner Elon Musk\u00a0<\/strong>tweeted<\/a>, \u201cCommercial real estate is melting down fast. Home values next.\u201d<\/p>\n

However, housing professionals don\u2019t expect any steep drops that will provide house hunters with much relief. Despite higher mortgage interest rates<\/a>, there are still legions of would-be buyers in the real estate market competing for an extremely limited number of homes for sale.<\/p>\n

Even as mortgage rates hovering around 7% push home prices down a little from last summer\u2019s peaks, prices are expected to remain strong as a result of the housing shortage.<\/p>\n

\u201cMost likely we\u2019ll see a little bit of decline followed by some months of subpar growth,\u201d says Realtor.com\u00ae Chief Economist Danielle Hale<\/strong>. \u201cI don\u2019t anticipate double-digit price declines. I expect prices to mostly move sideways over the next year or so.\u201d<\/p>\n

In February, sale prices for existing homes, which exclude new construction, began slipping year over year, according to National Association of Realtors\u00ae data. Prices slipped 0.2% annually in February, 0.9% in March, and 1.7% in April. Prices for newly constructed home sales began dropping in April, falling 8.2% year over year, according to federal data.<\/p>\n

Economists prefer year-over-year comparisons to account for normal, seasonal fluctuations in the housing market. For example, home prices are typically highest in the spring and summer. They traditionally fall as the weather cools down.<\/p>\n

List prices are expected to go negative this month as sellers accept the fact that they\u2019re not getting the prices they initially wanted. They fell 0.9% for the week ending June 10, according to the most recent Realtor.com data. Lower sale prices signal that sellers are pricing their properties aspirationally, but are coming down a little to make the sale.<\/p>\n

\u201cWhat that really shows is that sellers are catching up to where buyers are,\u201d says Hale. \u201cSellers are willing to accept somewhat lower prices. In the next few weeks, they\u2019re going to be starting with a lower asking price.\u201d<\/p>\n

Even though prices might be falling nationally, they\u2019re not going down in every market or for every home. In some parts of the country, prices are shooting up. And the most desirable homes continue to receive multiple offers.<\/p>\n

\u201cEven if someone is in a market where they see the local home prices are going down, that doesn\u2019t mean that every home in every neighborhood is seeing prices drop,\u201d says\u00a0Ali Wolf<\/strong>, chief economist of the housing market consultancy Zonda. \u201cIf it\u2019s in a good school district, has curb appeal, and is a turnkey home, even in the market [seeing] prices going down, those home prices may keep going up.\u201d<\/p>\n

How low will home prices go?<\/h2>\n

Housing economists don\u2019t expect any big price drops, certainly nothing like what happened during the Great Recession<\/a>\u00a0when the housing bubble popped. Most anticipate single-digit declines.<\/p>\n

Realtor.com predicts a small decline, similar to the 2% year-over-year drop expected by NAR. But while Realtor.com expects prices will mostly flatten out next year, NAR foresees them rising by about 3% in 2023.<\/p>\n

\u201cWe don\u2019t expect price declines to remain long,\u201d says NAR Senior Economist Nadia Evangelou<\/strong>.<\/p>\n

Housing consultancy Zonda expects home prices will be about 3% lower nationally this year than they were in 2022.<\/p>\n

\u201cIf we\u2019re wrong, we\u2019ll probably be too positive. It could be down more than what we\u2019re calling for,\u201d says Zonda\u2019s Wolf. \u201cThe key things that will determine where home prices go will be [the housing] inventory, the unemployment rate, and mortgage rates.\u201d<\/p>\n

But Mark Zandi<\/strong>, chief economist of Moody\u2019s Analytics, anticipates a larger, more prolonged drop in prices. He predicts home prices will fall 8.5% over a three-year stretch, from the peak last July through early 2025. Buyers shouldn\u2019t expect big price cuts at the lower end of the market, where the competition is greatest for a very limited number of more affordably priced homes.<\/p>\n

The declines won\u2019t erase the years of previously unthinkable price gains during the COVID-19 pandemic.<\/p>\n

\u201cMost experts don\u2019t expect prices to revert back to 2019 or early 2020 levels,\u201d adds Wolf. \u201cIt\u2019s important to keep a home price correction in context. We experienced a historic run-up in prices. A 3% or 5% drop is not catastrophic.<\/p>\n

\u201cIt does not mean there\u2019s a housing bust and millions of people are going to lose their homes,\u201d she says.<\/p>\n

Lower home prices won\u2019t benefit buyers all that much<\/h2>\n

Homebuyers shouldn\u2019t be popping the Champagne just yet. Lower prices likely won\u2019t make much of a dent in their bottom lines.<\/p>\n

With mortgage rates hovering around 7% for 3o-year fixed-rate loans, monthly mortgage payments will likely remain challenging. Today\u2019s buyers will shell out about 21% more each month on their mortgage than they would have a year ago. Their payments are more than double what they would have paid three years ago.<\/p>\n

(The analysis compares national median list prices in May 2023, May 2022, and May 2020 using Realtor.com data as well as average 30-year fixed mortgage rates for the last week of May from Freddie Mac. It also assumes buyers put down 20% and does not include property taxes, insurance, and other costs.)<\/p>\n

\u201cIn most places, people are not seeing their mortgage payments drop,\u201d says Hale. \u201cHomebuying costs are not really going to go down.\u201d<\/p>\n

Home prices have fallen in some markets, are rising in others<\/h2>\n

Real estate, of course, is all about location<\/a>. Some parts of the country, such as the more expensive Western region, have already experienced steep price drops. These areas might have already bottomed out, and some are already seeing prices rebound.<\/p>\n

Prices might also be weaker in the Southeast. While the region has attracted scores of new residents, it has also increased its supply of new housing. Builders have more land available and fewer building restrictions to contend with in the area.<\/p>\n

\u201cThere\u2019s only a certain amount of people who can continue to purchase homes at the prices that they\u2019re at,\u201d says Zonda\u2019s Wolf. \u201cWe may see prices come down to match incomes.\u201d<\/p>\n

Meanwhile, prices are still rising<\/a> in some cheaper Midwestern and Northeastern markets. For example, in the Cincinnati metropolitan area, median list prices were up 19.9% year over year in May, according to Realtor.com data. They rose 19.2% in Rochester, NY, and 17.2% in Hartford, CT.<\/p>\n

\u201cIt\u2019s going to depend on where you live,\u201d says Wolf. \u201cMost markets will probably see prices come down a little bit year over year.\u201d<\/p>\n

Should homeowners who bought at the peak be worried?<\/h2>\n

Those who purchased homes at the peak shouldn\u2019t worry too much, especially if they don\u2019t plan on selling anytime soon.<\/p>\n

Homeowners lost about 0.7% in equity<\/a> in the first quarter of this year, according to real estate data firm CoreLogic. That\u2019s roughly $5,400 per homeowner with a mortgage.<\/p>\n

The rule of thumb is for folks to stay in their properties for at least five years so they don\u2019t end up in the red. This accounts for minor market fluctuations as well as the closing costs that sellers inevitably wind up paying in a sale. Those who waited out down markets have historically recouped their lost home values and then some.<\/p>\n

\u201cThere can be short-term changes\u201d in home values, says Keith Gumbinger<\/strong>, a vice president at HSH.com, a mortgage information website. But \u201chome prices generally recover over time.\u201d<\/p>\n

What could lead home prices to rise<\/h2>\n

Despite the smartest minds in the business expecting home prices to fall, there\u2019s no guarantee it will happen.<\/p>\n

If mortgage rates were to fall below 5%, that\u2019s considered to be the tipping point. More sellers would likely put their homes up for sale, and there would be an increase in buyers in the market.<\/p>\n

That extra demand, and the ensuing bidding wars and offers over asking price, would be likely to push prices back up again.<\/p>\n

\u201cThere are so many factors that could influence what happens with home prices,\u201d says Wolf.<\/p>\n

The post Home Prices Are Finally Falling: How Low Will They Go?<\/a> appeared first on Real Estate News & Insights | realtor.com\u00ae<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"

Getty Images For the past year, real estate experts, pundits, and that guy you sat next to at the bar\/bus\/movies have been saying that home prices are poised to drop after several years of previously unthinkable gains. But now that home prices are finally coming down, just how low will they go? That\u2019s the million-dollar…Read More→<\/a><\/p>\n","protected":false},"author":0,"featured_media":2626,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-2625","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"_links":{"self":[{"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/posts\/2625","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/comments?post=2625"}],"version-history":[{"count":0,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/posts\/2625\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/media\/2626"}],"wp:attachment":[{"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/media?parent=2625"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/categories?post=2625"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/tags?post=2625"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}