Experts Predict Home Prices May Fall as Rising Mortgage Rates Slow Housing Market
The housing market across the nation and Southern California is experiencing a slowdown due to rising mortgage rates, leading many prospective buyers and sellers to wonder if home prices will fall. Analysts are now adjusting their forecasts to include the possibility of price declines next year, marking a significant shift from earlier predictions of simply slower price appreciation.
The rapid increase in mortgage rates, which have risen above 6% this month, has significantly impacted purchasing power for potential homebuyers. As a result, many buyers have pulled back, causing a decrease in overall demand. In response, a growing number of home sellers have begun dropping their list prices, signaling a potential shift towards lower sales prices in the future.
Experts such as Jordan Levine, chief economist at the California Association of Realtors, now believe that prices will indeed go down. Levine attributes this shift in forecast to the repeated surges in mortgage rates and the real-time pullback from prospective buyers.
While some major forecasters are now predicting sustained price declines in 2023, many still believe that a slower-growth scenario is more likely. However, the possibility of price declines underscores the rapidly changing nature of the housing market.
Despite the potential for price declines, experts do not anticipate a collapse in home prices like during the Great Recession. Tighter lending standards and a smaller likelihood of foreclosures and distressed sales are expected to limit the extent of any price declines. Additionally, a large cohort of millennials in their early 30s looking to buy homes for the first time is expected to support the market.
Overall, while the housing market is facing challenges due to rising mortgage rates, experts believe that any potential price declines will likely be moderate and not as severe as past downturns. The market is expected to adjust to the changing conditions, with prices potentially stabilizing in the coming years.