BENGALURU (Reuters) – U.S. house prices will fall less than previously expected this year before stagnating in 2024, real estate analysts polled by Reuters said, despite widespread expectations that interest rates will remain high for longer.
Although the US Federal Reserve embarked on an aggressive tightening cycle four decades ago, median home prices have fallen just over 5% from recent highs, hardly a drop compared to a 45% rise during the COVID-19 pandemic. .
This resilience in one of the most interest rate sensitive sectors of the economy is due in large part to the tight supply of homes, which was not expected to abate for at least the next six months.
A May 15-30 poll of 30 real estate analysts showed home prices, which resumed their rally in March after eight months of decline, will fall 2.8% on average this calendar year. This is less than the 4.5% decline expected in March.
Median home prices according to the S&P CoreLogic Case-Shiller composite of 20 metropolitan areas are expected to decline in the next year.
The projected 9% drop from peak to trough is less than a third of the recession during the 2007-2008 global financial crisis, putting prices out of reach for aspiring homeowners.
“Looking forward, we think there’s room for a little bit more downside,” said Sam Hall, real estate economist at consultancy Capital Economics. “Affordability remains fatigued and the weak economy will weigh on homebuyer sentiment.”
“Since supply is likely to remain tight, there is a possibility that home prices will not fall as risky as we previously anticipated.”
Rising house prices combined with rising consumer inflation mean the Fed, which raised its key interest rate from near zero in early 2022 to 5.00-5.25%, will hold out at least through the end of 2023, while maintaining upward pressure on foreclosure rates. real estate.
The 30-year fixed mortgage rate, which is currently around 6.7%, was expected to average 6.2% in 2023. It is expected to drop to 5.5% in 2024 based on expectations that the Federal Reserve will cut interest rates at that time.
These high mortgage rates constrain the supply of housing, which puts upward pressure on prices, as well as demand.
“Although mortgage rates have more than doubled since 2021, homeowners have not been forced to sell because most have a job, and many are reluctant to list because they have a good deal on a long-term mortgage,” said Sal Guaterie, chief officer. “. Economist at BMO Capital Markets.
Existing home sales are currently running at an annual rate of 4.28 million units – well below the peak of 6.56 million units in January 2021 – and are expected to remain near that rate.
Just over 70% of respondents, 16 of 22, said a significant downturn was more likely than a rebound in home prices over the remainder of the year.
“If the Fed is forced to tighten policy further to contain inflation, the market could resume its downward slope,” added BMO’s Guatieri.
(For other stories from Reuters’ quarterly housing market surveys:)
(Reporting by Indradeep Ghosh and Prirana Bhatt) Polling by Aditi Verma and Manish Kumar; Editing by Jonathan Keeble, Ross Finlay and Sharon Singleton
Our standards: Thomson Reuters Trust Principles.
“Beer aficionado. Gamer. Alcohol fanatic. Evil food trailblazer. Avid bacon maven.”