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The End Is Near! UPDATED Housing Market Forecast.

NEW HOUSING MARKET UPDATE! Home Price Growth is predicted to slow to Zero by this time next year! We will be looking Mark Zandi’s housing market forecast, the chief economist at Moody’s Analytics. Is it becoming a buyers market this year? And what do other economists have to say about the home price growth for next year? And what is causing the small inventory?

Home price growth to slow to zero by this time next year. Zero!

This quote came from Mark Zandi, chief economist of Moody’s Analytics when speaking to Lance Lambert of fortune.  He said that “spiking mortgage rates should cause year-over-year home price growth—which is up 19.8% over the past 12 months—to slow to zero by this time next year. If it comes to fruition, it would mark the slowest home price growth rate since April 2011 to April 2012.”

So lets see how he came to this conclusion. 

We’ll take a look at Fortunes article and what chief economists from Redfin, Moody’s Analytics, Corelogic and the mba (Mortgage bankers Association) have to say. So lets just dive right in. 

Redfin reports in their latest Housing Market Update The share of home sellers who dropped their asking price shot up to a six-month-high of 15% for the four weeks ending May 1, up from 9% a year earlier.

For homebuyers, the typical monthly mortgage payment skyrocketed a record 42% to a new high during the same period. 

Although some sellers are getting a little worried about buyers leaving the market due to the higher interest rates,  there is still too little inventory to affect most sellers so homes are still selling fast and escalating way over list price. 

“Homebuyers continue to be squeezed in nearly every way possible, which is causing some to take a step back from the market,” said Redfin Chief Economist Daryl Fairweather. “Unfortunately for buyers hoping to find a deal as competition cools, sellers are pulling back even faster, which is keeping the market deep in seller’s territory. 

This softening of the market is intentional. As the fed reserve lowered interest rates at the beginning of the pandemic to help stimulate the market, they are now raising rates to hope to fight inflation so the housing market doesn’t burst. 

In December, the average 30-year fixed mortgage rate sat at 3.11%. As of last week, that rate is up to 5.27%—its highest level since 2009.

lance Lambert from fortune gave a telling example:

If someone took out a $500,000 mortgage at a 3.11% fixed rate, that borrower would owe a monthly principal and interest payment of $2,138 on a 30-year loan. However, at a 5.27% rate, that payment would jump to $2,767. Not only are those higher rates pricing out some would-be homebuyers, but it also means some borrowers—who must meet lenders’ strict debt-to-income ratios—have lost their mortgage eligibility.

This difference of $629 a month or $7548 a year is no joke. And just for kicks, that’s $226,440 over the course go a 30 year loan. That’s just the difference between the 2 rates!

So why are buyers still buying?

Some say that the fear of rates going up even more is the impetus for new sales right now. 

Others say that The lack of inventory over the past two years has created a pileup of would-be buyers. As some of those buyers get priced out, there may be others waiting to take their place. 

Housing economists say it will take time to work through that pent-up demand but once we do, the housing market could cool even further.

Until the inventory catches up with the demand, prices will continue to go up.  

Redfin’s chief economist, Darryl Fairweather says that “Even though price drops are becoming more common, most homes are still selling above asking price and in record time”.

Lets get back to Zandi.

Fortunes Lambert spoke to Mark Zandi, the chief economist of Moody’s Analytics, about the nations most overpriced regional housing markets. 

Zandi said he expects some of the nation’s most overpriced regional housing markets to overheat and see price drops between 5% to 10% over the coming year. Take a look at Lamberts Map to see what Moodys analytics thinks about your neck of the woods. 

It looks like their giving the DMV a 21 which doesn’t seem so bad compared to other places but I can tell you, I think we are higher than the by what I’m seeing around here  

Not everyone agrees with Zandi that home price growth is is heading toward 0.

The CoreLogic HPI Forecast indicates that home prices will increase on a month-over-month basis by 1.2% from March 2022 to April 2022 and on a year-over-year basis by 5.9% from March 2022 to March 2023.

the Mortgage Bankers Association forecasts that U.S. home prices will rise 5.2% over the coming 12 months 

 Zillow researchers released a revised forecast, predicting that U.S. home prices would rise 14.9% between March 2022 and March 2023

So what do you think will happen?

We can’t deny the impact rising interest rates are having on the housing market. As we’ve discussed in previous videos, buyers are getting priced out as they can’t get approved for the mortgage they did 4 months ago and others dimply don t want to pay the inflated prices. 

Less buyers should calm the market down. 

Add to that, sellers are starting to feel fomo about not taking advantage of this crazy sellers market and are quickly putting their homes on the market. 

More inventory + less buyers should equal a more balanced market. 

And yet, today, here in dmv, market is still super hot, multiple offers and high prices. 

I still think that people who thought they were going to sell in 2022 but had refinanced during the last year and a half are now staying put which tighten Inventory.

Other sellers who would like to sell have nowhere to go unless they want to buy in this sellers market or rent which we know is very expensive these days. 

So, as long as there’s less inventory than demand, the sellers market continues and prices will keep going up. 

I guess well have to see if the even higher rates than those of today in may 2022 will impact the housing market even more  

It doesn’t look like the fed reserve will stop until it calms inflation down so we will see. 

I hope you got value out of todays blog. 

For more housing forecasts, check out the next blog.

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