The first half of 2022 saw national house prices jump 10.7% in just six months. The second half of 2022 then saw national house prices fall by 4.5%. This speaks to the 180 degree turn the US housing market went through last year as the Federal Reserve battled inflation triggered the first housing correction in more than a decade.
However, in the first months of 2023 this housing fix lost a lot of momentum as markets across the South, Northeast and Midwest begin to show monthly home price increases again. As the housing market entered the new year, it got a boost from its seasonally strong spring period, and from the modest improvement in affordability due to mortgage rates falling back below 6.5% and the fall in national house prices towards the end of last year.
This begs the question: is this the lowest real estate price or simply a fake head?
It depends who you ask.
Ahead, Zillow economists expect U.S. home values, as tracked by the Zillow Home Value Index (ZHVI), to rise 0.5% between January 2023 and January 2024. Meanwhile, Moody’s Analytics economists expect US home prices, as measured by Moody’s Analytics Repeat Sales House Price Index, to decline 4.2% between December 2022 and December 2023.
Let’s take a closer look at the regional forecast models produced by Zillow and Moody’s.
Of the 400 largest housing markets tracked by Zillow, the company expects 238 markets to see positive house price growth between January 2023 and January 2024, while it expects six markets to remain. stable and 156 markets see falling house prices over the next 12 months. . Simply put: Zillow expects only 39% of major markets to see lower home prices in the coming year.
“Many markets may have already seen [house] prices have bottomed out and these price cuts could help attract more buyers this spring,” wrote Jeff Tucker, senior economist at Zillow, in a report published last week.
According to Zillow, tight supply will make it difficult for house prices to fall in the future.
Of the 403 largest housing markets tracked by Moody’s, the company expects eight markets to see home prices, as measured by Moody’s Analytics’ Repeat Sales Home Price Index, rise between fourth quarter of 2022 and the fourth quarter of 2023. He expects the other 395 markets to record lower home prices over the next 12 months.
In total, Moody’s expects 98% of major markets to see lower home prices over the coming year.
By the time home prices hit a national low, Moody’s expects home prices to be about 10% below levels reached at the June 2022 peak.
“A decline of nearly 10% from peak to trough of the Moody’s HPI Repeat Sales Index [is our forecast]. This assumes fixed [mortgage] average rates close to 6.5% this year, and although the economy is weak, there is no recession,” said Mark Zandi, chief economist at Moody’s Analytics. Fortune. If a recession were to occurZandi’s model would see that the decline in national house prices from peak to trough would be around 20%.
Why does Moody’s expect home prices to continue falling? Zandi says the prices are simply too far removed from underlying fundamentals like earnings.
So what is really happening to house prices, so far, in 2023? The graph above, which shows the transition from December 2022 to February 2023, gives us an idea.
An updated analysis of Zillow Home Value Index Data by Fortune (see chart below), finds that 38% of the nation’s 200 largest housing markets saw month-over-month home price declines in February. This is well above normal levels for a month of February; however, it is well below last September, when 79% of major housing markets tracked by Zillow saw a month-over-month decline.
In the first two months of 2023, the biggest home price declines were seen in markets like Austin (down 2.5% since December), Boise (down another 2.4%), Las Vegas (down an additional 2.4%), Phoenix (down an additional 2.2%) and San Jose (down an additional 2.1%).
While many Western real estate markets continue to decline, many markets in the Midwest and Northeast are on the rise again. That includes places like Cincinnati (up 0.59% since December) and Chicago (up 0.57% since December). Unlike their Western counterparts, home prices in many northern markets have not become as detached local income levels during the pandemic housing boom.
Next week, Zillow will release regional home price readings for March. Here is a start look at the March 2023 national survey.
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