A lengthy plunge in US home sales is probably going nearing a bottom – though experts say prices will remain in freefall for a while as a housing correction plays out in overheated markets.
Sales of previously-owned homes fell for the twelfth consecutive month in January, falling 0.7% in comparison with December, in line with data released by the National Association of Realtors released this week. Sales were down by a whopping 36.9% in comparison with the identical month one yr ago.
The housing market has now largely adjusted to recent rate of interest hikes that caused mortgage rates to double last yr, in line with Ian Shepherdson, chief economist at Pantheon Macroeconomics. Nevertheless, home prices have yet to completely reflect the slowdown.
“Now that the downward adjustment in home sales to response to the initial surge in rates is essentially complete, the large story for 2023 will probably be the speed and extent to which prices follow suit,” Shepherdson said in a note to clients.
The declines could possibly be steep. Pantheon estimates that single-family existing home prices were still “16.5% above their long-run average as a ratio of disposable incomes in January,” in line with Shepherdson.
Home prices are still due for a pointy decline, in line with one expert.Getty Images
The pace of price declines will depend upon how quickly the provision of obtainable homes rises within the months ahead, he added.
Last yr, Pantheon predicted that US home prices could fall by as much as 20% by the top of 2023. Real estate firm Redfin forecasted a more modest decline of about 4%.
The median sale price of existing homes has declined for eight straight months – plunging from a peak of $413,800 last June to $359,000 as of January, in line with the NAR’s data.
Nevertheless, prices still rose by 1.3% in January in comparison with the identical month one yr ago. The general market hasn’t posted a year-over-year decline in home prices in greater than a decade.
Some regional markets are already seeing price declines on an annual basis. Within the West region – which incorporates all states west of Colorado — median prices fell 4.6% to $525,200 in January in comparison with the previous yr.
Current mortgage rates remain stubbornly high at 6.32%.
“Home sales are bottoming out,” NAR Chief Economist Lawrence Yun said in a press release. “Prices vary depending on a market’s affordability, with lower-priced regions witnessing modest growth and dearer regions experiencing declines.”
Yun added that home buyers are “starting to have higher negotiating power” as more properties sit in the marketplace.
“Homes sitting in the marketplace for greater than 60 days might be purchased for around 10% lower than the unique list price,” Yun said.
