- Summary:
- The housing market is sending mixed signals as concerns about high interest rates, high inflation, and slow wage growth.
The housing market is sending mixed signals as concerns about high-interest rates, high inflation, and slow wage growth. As such, many analysts have been coming up with their next housing crash predictions. At the same time, many buyers have continued worrying about whether to buy now or wait for prices to slip.
State of the housing market
The American housing market boomed during the pandemic even as the unemployment rate jumped. This trend happened to record low-interest rates and huge savings among Americans as they spent most of their time at home. As a result, US home prices surged, contrary to what most analysts were expecting when the pandemic started.
Now, the housing market has changed in the past few months as mortgage rates surge. Recent data shows that the average mortgage rate in the US rose to 6%, which is the highest level since 2008. As a result, the number of people buying homes has been falling in the past few months.
And the most recent data published this week showed that the average home prices dropped in July from June. The CoreLogic National Home Price Index dropped by 0.3% in July. This was the first time that the price dropped since January 2019. On a seasonally adjusted basis, the index fell by 0.2%, the first time in a decade. The median existing home price rose by 7.7% in August to $389,500.
Next housing crash prediction
Therefore, housing economists believe that home prices will slow dramatically in the coming months as demand wanes. In a recent report, analysts at Goldman Sachs warned that the housing market crash will happen in 2023. The report said:
“While outright declines in national home prices are possible and appear quite likely for some regions, large declines seem unlikely.”
Not all analysts are pessimistic. In a report, analysts at Morgan Stanley said that a housing crash will likely not happen. The report cited record low supplies and conservative lending. It said:
“Record-low supplies, years of conservative lending and other factors suggest that home prices should continue appreciating, though at a slower pace.”
The same view is supported by analysts at JP Morgan, who said that there was low risk of another US housing market correction. The report said:
“While there are some pockets of rapid price growth and extremely high price levels, in addition to a few places with fairly high prices despite growing supply, there is nowhere that has combined these price patterns with rapid debt growth, as occurred in some places in the mid-2000s.”