Nashville, Tenn. — Higher mortgage rates and recession fears are hurting home prices, so expect growth to be flat this year, one expert says.
“Our forecast is for home price growth to continue to moderate,” Joel Kahn, vice president and deputy chief economist of the Mortgage Bankers Association, said Sunday during the organization’s annual conference in Nashville, Tenn.
Home prices have already started to fall. According to Case-Shiller, House prices have fallen June to July month-over-month for the first time in 20 years. The latest numbers, which will be for August, will be reported Tuesday morning.
With a potential recession on the cards, with mortgage rates at or above 7%, “we’ve already seen a pretty dramatic pullback in housing demand,” Kahn said.
National home-price growth is therefore expected to “flatten” in 2023 and 2024, he said. That could be a “silver lining” for some, Kahn added, as it brings home prices back to a more “reasonable level.”
A leveling off of house-price growth should allow households to afford homes that are currently too expensive, in terms of wages and savings.
But he cautioned that home prices may actually fall in some markets. We are already seeing home values decline in some markets, from Pandemic Boomtown Like Austin and Phoenix The well-known expensive ones San Francisco Bay Area.
Still, even with falling prices, don’t expect a surge in inventory as people sit on their ultra-low mortgage rates that they likely won’t enjoy in the near future.
As of June Information from the Federal Housing Finance Agency, nearly a quarter of homeowners have mortgage rates less than or equal to 3%. And the vast majority of owners – 93% – have a rate of less than 6%.
On top of that, supply is likely to be very tight.
Nevertheless, demand for housing should eventually recover, given that there are many people who will soon need to own a home.
MBA’s Kahn estimates that there are 50 million people in the 28-38-year-old demographic, some – or many – of whom could be potential homeowners in the future.
For those under 35, the homeownership rate is just 39%, Kahn said, while the share rises to 61% for people ages 35 to 44.
So as people age, “we’re fairly confident that if we stick to these trends, you’ll see a very supportive demographic driver of housing demand for many years to come,” Kahn said.
Have thoughts on the housing market? Write to MarketWatch reporter Aarthi Swaminathan at firstname.lastname@example.org