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HomeMarket‘Flatlined’ — or not? 5 economists and real estate pros on what...

‘Flatlined’ — or not? 5 economists and real estate pros on what will happen to the housing market next

Pros predict the housing market

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The housing market is in flux. Home prices nationwide increased year-over-year by 11.4% in September 2022, according to CoreLogic. But on a month-over-month basis, home prices actually declined, dropping 0.5% from August to September of this year. What’s more, home-seller profits dropped in the third quarter as the housing market boom eased, notes real estate data company ATTOM. But what comes next? We asked real estate experts and economists what to expect from the housing market in December:

Prediction 1: Prices could come down in some markets

Jeff Tucker, senior economist at Zillow, says he expects “that prices may drop a little by year’s end, based on the very soft demand we’ve seen in October and November.” And Jacob Channel, senior economist at LendingTree, notes that: “Prices are coming down in some markets.” (See the best mortgage rates you may get here.)

Channel adds: “They may come down somewhat owning to diminished buyer demand from rates remaining relatively high as well as seasonality in the housing market — remember, the housing market is usually less active during the colder months of the year.” That said, it’s also likely prices could remain where they are this month, he adds.

Prediction 2: But major price drops are unlikely

“Home prices have pulled back in some markets, but rising interest rates have effectively canceled out any potential benefit to home buyers. Despite that, demand still far outpaces supply, so don’t expect to see major drops in home prices,” says Kate Wood, home expert at NerdWallet.

Prediction 3: Prices will plateau in most areas

“There’s been a softening of prices in what had previously been the hottest markets and prices in those select areas will see some pullback, but this will remain the exception rather than the rule. Most areas will see a plateauing of home prices and sellers won’t get the price they would’ve gotten in April or May, but they’ll still get a price that’s higher than year-ago levels,” says Greg McBride, chief financial analyst at Bankrate. 

Prediction 4: Buyers should expect fewer listings

“National home prices have basically flatlined since June, as both supply and demand have been throttled by high mortgage rates. Affordability challenges have pushed many buyers out of the market, but current homeowners are also incentivized to hunker down, with the benefit of much lower monthly payments than they would owe on a new mortgage. I expect that prices may drop a little by year’s end, based on the very soft demand we’ve seen in October and November, but buyers should also expect fewer listings to choose from until the near year,” says Tucker. (See the best mortgage rates you may get here.)

Prediction 5: Annual price gains will ease

“Despite sellers reducing their asking prices as homes stay longer on the market, sales prices continue to remain higher than the previous year. Homes appreciate slower than in the previous months, but the lack of housing inventory is still leading to price gains. By year end, price gains will ease to 5%,” says Nadia Evangelou, senior economist and director of real estate research at the National Association of Realtors. 

Prediction 6: The market is rebalancing

“For the first time in years, we’re seeing sustained inventory gains and the slowing of home price appreciation. But, given the lingering inventory challenges, prices are still up compared to 2021. A home’s value is becoming a much bigger part of the equation for buyers. Overall the market is rebalancing,” says Nick Bailey, president and CEO of RE/MAX. (See the best mortgage rates you may get here.)

Prediction 7: Home purchase timelines could accelerate as a result of the better than expected inflation reading from mid-November

“Home prices will continue to dip seasonally as is typical for this time of year but they’ll still be up compared to a year ago. The mortgage rate drop that followed a better than expected inflation reading in mid-November could accelerate some home purchase timelines and reverse some of the recent slowing in home price growth as shoppers rush to capitalize on these lower rates unless sentiment shifts to expect lower mortgage rates ahead,” says Danielle Hale, chief economist at Realtor.com.

The advice, recommendations or rankings expressed in this article are those of MarketWatch Picks, and have not been reviewed or endorsed by our commercial partners.

Credit: marketwatch.com

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