‘Continued deceleration of housing prices.’ Here’s what 5 economists and real estate professionals predict will happen to the real estate market this year

What will happen in the real estate market this year?

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When will house price growth really slow down? Will mortgage rates continue to rise? What do i need to know if i am looking to buy a home now? These are all questions we hear from readers, colleagues, and others, so we’ve asked top real estate economists and professionals to analyze what exactly is happening in the real estate market now.

Mortgage rates may continue to rise, but it depends on the economy

Already this year the average thirty-year fixed rates have risen from just over 3% in January to around 6%, as Bankrate data show. And growth may not stop there. (See the lowest mortgage rates you can get here.)

Danielle Hale, chief economist at Realtor.com, says it depends on many factors, including relationships at work. “If the employment report is too strong, it is likely to trigger a new mortgage rate hike in anticipation of broader Fed action.

And until we see hard evidence that inflation has peaked, there’s still a risk of mortgage rates going higher, says Greg McBride, Bankrate’s chief financial analyst. But he adds that the prospect of the Fed precipitating its interest rate hikes and doing more sooner rather than later could actually help keep mortgage rates in check or even reduce them. “More rate hikes now mean fewer rate hikes later, it means the timetable for peak interest rates is shifted up and means that any rate drop due to a weak economy will also happen sooner,” McBride states.

And here’s an interesting interpretation: “Real mortgage rates, the mortgage rate minus the inflation rate, are negative for the first time in 40 years, so mortgages aren’t as expensive as they seem when you check inflation. Inflation itself tends to serve as the basis for house price growth, with most quarters over the past 40-50 years facing higher house price growth than consumer price growth, ” says Mischa Fisher, chief economist at Angi, an internet services company that connects users with select professionals for home improvement projects and services.

House price appreciation will cool down …

“Due to the housing shortage, house prices will continue to rise in the coming months. Although inventory is improving, it will remain limited as homebuilders have reduced production of single-family homes, “says Nadia Evanhelou, senior economist and director of forecasting at the National Association of Realtor (NAR). However, as many homebuyers are priced high due to low affordability, house prices will not rise as fast as in previous months. “There will be a continued deceleration in house prices. However, house prices are likely to continue to see double-digit appreciation year on year. up year to August, “says Evangelou.

For his part, Hale says house prices, both median and sales, tend to slow as late summer approaches. “I expect this year to be typical in this respect. In addition to the usual seasonal slowdown, housing price growth is expected to continue to slow as the housing market recovers, ”says Hale. (See the lowest mortgage rates you can get here.)

… But overall house prices will rise again

For its part, Bankrate’s McBride says asking prices are dropping from lunar levels as potential buyers pull back. “Selling prices will stabilize as the market cools, but this cooling is just a return to the kind of balanced market that has been absent for the past couple of years,” says McBride.

“In August, I expect house prices to rise by an average year-over-year for four reasons,” says Fisher of Angi. Among them, common repeat sales indices like Case-Schiller and FHFA are lagging by a few months, so they won’t pick up on the latest daily conditions. And while affordability is at its lowest in 30 years, there are still supply and demand imbalances in real estate assets in many desirable metropolises. Furthermore, downward pressure on house prices is very common and, unless economic conditions force people to sell, they prefer to wait. Plus, inflation is a wild card, he adds.

The question is cooling down

Demand is retreating at today’s prices and home buyers are fewer and farther away than they have been for much of the pandemic, says Zillow senior economist Jeff Tucker. “This is cooling the market and pushing it towards the rebalancing it needs. Very expensive markets, where homebuyers are already on the edge when it comes to affordability and therefore more sensitive to changes in mortgage rates, are very likely to slow down, as well as pandemic superstar markets that have seen scorching growth over the past 2 years. years. says Tucker.

Meanwhile, uncertainty grows about what the economy holds, thus diminishing the willingness of buyers to go all-in and maximize their housing budgets when widespread inflation means other important categories such as gas, food and utilities they are consuming more of their salaries, says Hale. “By region, we are likely to see the largest slowdown in house price growth in the West and South, where both selling and selling prices are highest and where inventory has had the biggest turnaround. so far, “says Hale.

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