According to the latest Zillow Home Price Expectation (ZHPE) survey, economists and housing specialists anticipate that home prices will decrease by 1.6% by December 2023.[0] Rising mortgage rates are putting a chill on the US housing market, sapping recent buyer interest heading into the crucial spring selling season.[1] Existing-home sales have declined for 12 straight months, according to the National Association of Realtors, and US home prices have declined for six straight months, according to the closely watched Case-Shiller index.[2]
Though mortgage rates in January were lower, resulting in sales trends that mirrored pre-pandemic levels, affordability issues are hindering demand for homes as rates rose in February, thus diminishing buyers’ interest.[3] As of March 2, Freddie Mac reported that mortgage rates have increased for four consecutive weeks, reaching 6.65%, which is their highest point since the beginning of November. According to the Mortgage Bankers Association, mortgage applications from home buyers decreased to the lowest level in 28 years (on a seasonally adjusted basis) during the week ended Feb. 24.[4]
Black and Martinez-Garcia have noticed potential issues within the housing sectors of the US and Germany which could be a threat to the worldwide outlook due to the magnitude of the two countries’ economies and the considerable international financial repercussions.
Economists from the Dallas Federal Reserve noted evidence of trouble in the housing markets of both the United States and Germany, highlighting the potential impact on the global economy due to the magnitude of those countries’ economies and the likelihood of financial spillovers across borders.
On Tuesday, economists from the Dallas Fed expressed their concern that, despite the recent slowing or decrease in house-price growth in some countries, the possibility of a significant global housing decline remains.[5] Data suggests that affordability crises are frequently caused by unsustainable and widespread over-indulgence. Of particular concern is the increased susceptibility of the housing market to excesses that spread beyond national borders, resulting in major misallocation of resources and efficiency losses.[5]
“As of March 2, Freddie Mac reported that mortgage rates have increased for four consecutive weeks, reaching 6.65%, which is their highest point since the beginning of November. According to the Mortgage Bankers Association, mortgage applications from home buyers decreased to the lowest level in 28 years (on a seasonally adjusted basis) during the week ended Feb. 24.[4]
0. “Zillow: Experts Say Home Prices Will Grow Steadily Starting In ’24” National Mortgage Professional, 2 Mar. 2023, https://nationalmortgageprofessional.com/news/zillow-experts-say-home-prices-will-grow-steadily-starting-24
1. “US home prices could plunge 20% as risk of ‘global housing slide’ looms: Dallas Fed” New York Post , 1 Mar. 2023, https://nypost.com/2023/03/01/us-home-prices-could-plunge-20-as-risk-of-global-housing-slide-looms/
2. “Austin, Seattle, Phoenix and San Francisco will see double-digit drops in home prices” Daily Mail, 27 Feb. 2023, https://www.dailymail.co.uk/news/article-11799913/Austin-Seattle-Phoenix-San-Francisco-double-digit-drops-home-prices.html
3. “Altos: Home prices expected to be flat for the year” RealTrends, 28 Feb. 2023, https://www.realtrends.com/articles/altos-home-prices-expected-to-be-flat-for-the-year/
4. “Housing Market Momentum Stalls as Critical Spring Season Approaches” Mansion Global, 6 Mar. 2023, https://www.mansionglobal.com/articles/housing-market-momentum-stalls-as-critical-spring-season-approaches-378c5cc2
5. “Dallas Fed: Housing market is only passing through a modest correction, but ‘tighter than expected’ monetary policy could trigger a ‘more severe’ price drop” Fortune, 2 Mar. 2023, https://fortune.com/2023/03/02/dallas-fed-housing-market-modest-correction-monetary-policy-severe-price-drop