Historically speaking, home prices rarely decline on a year-over-year basis. Unless economics force the sellers’ hand, they usually won’t back down.
Of course, we’ve recently seen the US housing market slip into one of those rare periods where national home prices are actually falling – US home prices fell by 2.5% between June and November – and home We are only a few months away from seeing negative prices. On a year-over-year basis for the first time since the housing crash in 2012.
What’s up? The mad rush of demand during the pandemic housing boom, which saw US home prices rise 41% between March 2020 and June 2022, coupled with last year’s historic mortgage shock, put “pressure” on housing affordability. Some potential homebuyers have been priced out, while millions of other borrowers — who must meet lenders’ strict debt-to-income ratios — have lost mortgage eligibility entirely. That sharp pullback in housing demand has translated into a decline in home values.
The big question going forward is whether the correction in home prices will end soon or will it continue?
To better understand where regional home prices could be headed this year, Luck TechRepublic contacted CoreLogic to see if the firm would provide us with its January assessment of the nation’s largest regional housing markets. To determine the potential for regional home price declines, CoreLogic assessed factors such as income growth projections, unemployment forecasts, consumer confidence, debt-to-income ratios, affordability, mortgage rates and inventory levels. CoreLogic then placed regional housing markets into one of five categories, grouped based on the likelihood that home prices in that particular market will fall between November 2022 and November 2023.
Here are the groups of real estate research firms used for January’s analysis:
- Very high: Home prices likely to decline by over 70% between November 2022 and November 2023
- High: 50%-70% chance
- medium: 40%-50% chance
- Less: 20%-40% chance
- Very little: 0%-20% chance
Of the 392 regional housing markets measured by CoreLogic, zero markets currently have a “very low” or “low” likelihood of home prices declining between November 2022 and November 2023. Only one market has “moderate” margin of fall in prices. Meanwhile, CoreLogic placed 53 markets in the “high” camp and 338 markets in the “very high” odds camp.
Simply put: The January assessment finds 391 markets (markets in either the “high” or “very high” risk groups) more than 50% more likely to have a negative year-over-year home price reading in November 2023. is more.
This increased risk didn’t come from nowhere. Downside risks to home prices have been creeping in for months.
Back in November, 354 regional housing markets had a “high” or “very high” likelihood of a decline in home prices over the next 12 months. In October, 335 markets were in the “high” or “very high” risk camps. In August, there were 125 markets at risk. In July, there were 98 markets at risk. 45 markets were at risk in June. And in May, just 26 markets (see chart below) fell into those “high” or “very high” risk camps.
Why has the prospect of a fall in house prices increased so much in the last one year? Well, mortgage rates go higher in 2022 than industry insiders expect.
“As borrowing costs continued to rise and housing demand declined through the winter of 2022, home prices also declined in most markets. Nevertheless, the rate of monthly decline eventually slowed in October and November, to approximately 0.1%-0.2%. %, saw declines during the summer from appreciable and immediately following increases in mortgage rates. Nationally, home prices in the West Coast and Mountain West markets declined 2.5% from the spring peak, ranging from 8% to 12%. saw a large cumulative decline of 1.5%. Yet, only eight markets saw a decline in home prices on a year-on-year basis. With prices falling further, fewer metros are now considered overvalued – especially those West Coast markets where the cumulative decline has been notable. Looking ahead, the recent relief in mortgage rates should help bring back some of the lost homebuyer demand and prop up home prices, said Selma Hepp, deputy chief economist at CoreLogic. Chances are.” FortuneI.
One final point about CoreLogic analysis.
Just because a regional housing market has a “high” or “very high” likelihood that home prices will fall between November 2022 and November 2023 does not guarantee that home prices will actually fall. Finally, even though CoreLogic has 99% of regional markets with a “high” or “very high” risk of declining home prices, the company still projects a 2.8% increase in national home prices between November 2022 and November 2023 .
If you want to see how regional home prices have changed over the past six months, go here.
Want to stay updated on housing reform? Follow me on Twitter @NewsLambert,
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