{"id":1684,"date":"2023-03-04T05:02:49","date_gmt":"2023-03-04T10:02:49","guid":{"rendered":"https:\/\/embarrdowns.com\/us-housing-market-faces-potential-19-5-correction-as-rates-rise\/"},"modified":"2023-03-04T05:02:49","modified_gmt":"2023-03-04T10:02:49","slug":"us-housing-market-faces-potential-19-5-correction-as-rates-rise","status":"publish","type":"post","link":"https:\/\/embarrdowns.com\/us-housing-market-faces-potential-19-5-correction-as-rates-rise\/","title":{"rendered":"US Housing Market Faces Potential 19.5% Correction as Rates Rise"},"content":{"rendered":"

The US housing market is facing a potential 19.5% correction, according to Dallas Federal Reserve economists.[0]<\/a><\/sup> The economists warn that further rate hikes from the Federal Reserve could make a crash even worse, as the housing market remains vulnerable to global economic spillover effects.<\/p>\n

The US housing market experienced a \u201cpandemic boom\u201d in 2020, leading to a rapid deterioration in affordability. Goldman Sachs projects that home prices will fall 6.1% in 2023 as rates continue to tick higher.[1]<\/a><\/sup> This is in comparison to the 26% peak-to-trough home price crash seen between 2007 and 2012.[2]<\/a><\/sup><\/p>\n

According to economists from the Dallas Federal Reserve, home prices in the United States would need to decrease by 19.5% in order to bring the country in line with its housing fundamentals.[2]<\/a><\/sup> This could be triggered by tighter-than-expected monetary policy.<\/p>\n

The Fed\u2019s actions continue to affect the housing market, with mortgage rates going from 3.78% in 2017 to 4.94% in 2018.[3]<\/a><\/sup> The panel expects mortgage rates to trend downward after the first quarter, with 63% predicting that rates for 30-year fixed loans will be highest in Q1 of 2023.[4]<\/a><\/sup><\/p>\n

Goldman Sachs analysts anticipate major decreases in house prices in four US cities by the end of 2021, which experienced housing booms during the COVID-19 pandemic.[5]<\/a><\/sup> Austin, Seattle, Phoenix and San Francisco will all experience double-digit price declines as an increase of available homes surpasses demand.[6]<\/a><\/sup><\/p>\n

Dallas Fed economists argue that if the observed price-to-rent ratio grows at an explosive rate relative to its fundamental-based ratio estimated with long-term interest rate and rent growth data, then it’s worth considering whether the sector is in a bubble.[7]<\/a><\/sup><\/p>\n

Homeowners who secured lower mortgage rates during the recent Pandemic Housing Boom (or previous years, due to the long-term low rates) are preferring to remain in their homes, rather than selling and having to acquire a loan with rates nearing the 7.37% peak. Most of these homeowners have rates of 3% or less.[5]<\/a><\/sup> This, combined with the Fed\u2019s actions, is making it difficult for potential buyers to take action, particularly for repeat buyers with existing mortgages with rates less than half of current rates.[8]<\/a><\/sup><\/p>\n

In conclusion, the US housing market is facing a potential 19.5% correction and further rate hikes from the central bank could make a crash even worse.<\/p>\n

0. <\/span>“The Fed’s own economists are warning of a 19.5% housing correction” Business Insider, 1 Mar. 2023, https:\/\/www.businessinsider.com\/fed-economists-markets-investing-housing-correction-crash-economy-rate-hikes-2023-2<\/a><\/a><\/p>\n

1. <\/span>“US home prices could tumble nearly 20% and Fed economists warn further rate hikes risk an even worse housing c” Business Insider India, 28 Feb. 2023, https:\/\/www.businessinsider.in\/stock-market\/news\/us-home-prices-could-tumble-nearly-20-and-fed-economists-warn-further-rate-hikes-risk-an-even-worse-housing-correction-the-bubble-hypothesis-merits-attention\/articleshow\/98316432.cms<\/a><\/a><\/p>\n

2. <\/span>“Dallas Fed: Housing market is only passing through a modest correction, but ‘tighter than expected’ monetary policy …” Yahoo Life, 2 Mar. 2023, https:\/\/www.yahoo.com\/lifestyle\/dallas-fed-housing-market-only-101346689.html<\/a><\/a><\/p>\n

3. <\/span>“Everybody Wants the Answer to This Question” Scotsman Guide News, 1 Mar. 2023, https:\/\/www.scotsmanguide.com\/residential\/everybody-wants-the-answer-to-this-question\/<\/a><\/a><\/p>\n

4. <\/span>“Expert panel expects home prices will grow at a steady pace starting in 2024 – Zillow Gr (NASDAQ:Z), Zill” Benzinga, 2 Mar. 2023, https:\/\/www.benzinga.com\/pressreleases\/23\/03\/n31165856\/expert-panel-expects-home-prices-will-grow-at-a-steady-pace-starting-in-2024<\/a><\/a><\/p>\n

5. <\/span>“\u2018I can\u2019t afford to sell because I don\u2019t want to lose that rate\u2019: 3% mortgage rates will loom large over the U.S. housing market for years to come” Yahoo Life, 2 Mar. 2023, https:\/\/www.yahoo.com\/lifestyle\/t-afford-sell-because-don-225152689.html<\/a><\/a><\/p>\n

6. <\/span>“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<\/a><\/a><\/p>\n

7. <\/span>“Threat of global housing slide looms amid rising rates” Federal Reserve Bank of Dallas, 28 Feb. 2023, https:\/\/www.dallasfed.org\/research\/economics\/2023\/0228<\/a><\/a><\/p>\n

8. <\/span>“Home Prices Will \u2018Bottom Out\u2019 in 2023, According to Experts” AOL, 3 Mar. 2023, https:\/\/www.aol.com\/finance\/home-prices-bottom-2023-according-170112274.html<\/a><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The US housing market is facing a potential 19.5% correction, according to Dallas Federal Reserve economists.[0]<\/a><\/sup> The economists warn that further rate hikes from the Federal Reserve could make a crash even worse, as the housing market remains vulnerable to global economic spillover effects.<\/p>\n

The US housing market experienced a \u201cpandemic boom\u201d in 2020, leading to a rapid deterioration in affordability. Goldman Sachs projects that home prices will fall 6.1% in 2023 as rates continue to tick higher.[1]<\/a><\/sup> This is in comparison to the 26% peak-to-trough home price crash seen between 2007 and 2012.[2]<\/a><\/sup><\/p>\n

According to economists from the Dallas Federal Reserve, home prices in the United States would need to decrease by 19.5% in order to bring the country in line with its housing fundamentals.[2]<\/a><\/sup> This could be triggered by tighter-than-expected monetary policy.<\/p>\n

The Fed\u2019s actions continue to affect the housing market, with mortgage rates going from 3.78% in 2017 to 4.94% in 2018.[3]<\/a><\/sup> The panel expects mortgage rates to trend downward after the first quarter, with 63% predicting that rates for 30-year fixed loans will be highest in Q1 of 2023.[4]<\/a><\/sup><\/p>\n

Goldman Sachs analysts anticipate major decreases in house prices in four US cities by the end of 2021, which experienced housing booms during the COVID-19 pandemic.[5]<\/a><\/sup> Austin, Seattle, Phoenix and San Francisco will all experience double-digit price declines as an increase of available homes surpasses demand.[6]<\/a><\/sup><\/p>\n

Dallas Fed economists argue that if the observed price-to-rent ratio grows at an explosive rate relative to its fundamental-based ratio estimated with long-term interest rate and rent growth data, then it’s worth considering whether the sector is in a bubble.[7]<\/a><\/sup><\/p>\n

Homeowners who secured lower mortgage rates during the recent Pandemic Housing Boom (or previous years, due to the long-term low rates) are preferring to remain in their homes, rather than selling and having to acquire a loan with rates nearing the 7.37% peak. Most of these homeowners have rates of 3% or less.[5]<\/a><\/sup> This, combined with the Fed\u2019s actions, is making it difficult for potential buyers to take action, particularly for repeat buyers with existing mortgages with rates less than half of current rates.[8]<\/a><\/sup><\/p>\n

In conclusion, the US housing market is facing a potential 19.5% correction and further rate hikes from the central bank could make a crash even worse.<\/p>\n

0. <\/span>“The Fed’s own economists are warning of a 19.5% housing correction” Business Insider, 1 Mar. 2023, https:\/\/www.businessinsider.com\/fed-economists-markets-investing-housing-correction-crash-economy-rate-hikes-2023-2<\/a><\/a><\/p>\n

1. <\/span>“US home prices could tumble nearly 20% and Fed economists warn further rate hikes risk an even worse housing c” Business Insider India, 28 Feb. 2023, https:\/\/www.businessinsider.in\/stock-market\/news\/us-home-prices-could-tumble-nearly-20-and-fed-economists-warn-further-rate-hikes-risk-an-even-worse-housing-correction-the-bubble-hypothesis-merits-attention\/articleshow\/98316432.cms<\/a><\/a><\/p>\n

2. <\/span>“Dallas Fed: Housing market is only passing through a modest correction, but ‘tighter than expected’ monetary policy …” Yahoo Life, 2 Mar. 2023, https:\/\/www.yahoo.com\/lifestyle\/dallas-fed-housing-market-only-101346689.html<\/a><\/a><\/p>\n

3. <\/span>“Everybody Wants the Answer to This Question” Scotsman Guide News, 1 Mar. 2023, https:\/\/www.scotsmanguide.com\/residential\/everybody-wants-the-answer-to-this-question\/<\/a><\/a><\/p>\n

4. <\/span>“Expert panel expects home prices will grow at a steady pace starting in 2024 – Zillow Gr (NASDAQ:Z), Zill” Benzinga, 2 Mar. 2023, https:\/\/www.benzinga.com\/pressreleases\/23\/03\/n31165856\/expert-panel-expects-home-prices-will-grow-at-a-steady-pace-starting-in-2024<\/a><\/a><\/p>\n

5. <\/span>“\u2018I can\u2019t afford to sell because I don\u2019t want to lose that rate\u2019: 3% mortgage rates will loom large over the U.S. housing market for years to come” Yahoo Life, 2 Mar. 2023, https:\/\/www.yahoo.com\/lifestyle\/t-afford-sell-because-don-225152689.html<\/a><\/a><\/p>\n

6. <\/span>“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<\/a><\/a><\/p>\n

7. <\/span>“Threat of global housing slide looms amid rising rates” Federal Reserve Bank of Dallas, 28 Feb. 2023, https:\/\/www.dallasfed.org\/research\/economics\/2023\/0228<\/a><\/a><\/p>\n

8. <\/span>“Home Prices Will \u2018Bottom Out\u2019 in 2023, According to Experts” AOL, 3 Mar. 2023, https:\/\/www.aol.com\/finance\/home-prices-bottom-2023-according-170112274.html<\/a><\/a><\/p>\n","protected":false},"author":3,"featured_media":1683,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[47],"tags":[],"_links":{"self":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/posts\/1684"}],"collection":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/comments?post=1684"}],"version-history":[{"count":0,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/posts\/1684\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/media\/1683"}],"wp:attachment":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/media?parent=1684"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/categories?post=1684"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/tags?post=1684"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}