Home prices have remained stubbornly elevated this year even amidst high lending rates and falling real estate demand. Consequently, housing market price predictions are in focus for many investors and would-be home buyers.
Despite unfavorable market conditions, real estate in the U.S. remains red-hot. 30-year fixed mortgage rates are trending around 6.3%, near their highest level in more than a decade. As a result, mortgage loan applications are down more than 50% from last year, reflecting a rapidly declining demand for housing. Yet, home prices only seemingly continue to rise.
According to the National Association of Realtors, the median existing-home price increased by nearly 15% year-over-year to $407,600 in May. This represents the highest level in its recorded history, dating back to 1999. About 60% of homes sold in May closed above their listing price, according to Redfin. Even as home sales fell 3.4% from April to May and sales dropped 8.6% from last year, home prices are still heating up.
Some economists expect that eventually, as interest rate hikes continue to ramp up mortgage rates, home prices will respond appropriately to the weakening housing demand. However, given the structural mismatch between the supply and demand for housing in the U.S., the response might not be as drastic as some are hoping.
Let’s see what the experts think about the price of homes going forward this year.
Housing Market Price Predictions
Ralph DiBugnara, the president of Home Qualified, believes the notion of worsening future buying conditions will likely result in a near-term surge in home demand, lifting prices in the process:
“The summer market will stay mostly high because of an increased urgency to buy … This urgency is spurred by fears of further rising rates and more homes coming to market, due to more sellers wanting to cash in on the equity they’ve gained over the last few years.”
Meanwhile, Greg McBride, Bankrate’s chief financial analyst, predicts an impending drop in demand. However, McBride also doubts the lack of supply will support a comparable easing in home prices:
“Even homebuilding activity is slowing due to supply constraints and cooling demand … But while the market is cooling, prices are not necessarily dropping. We will still see home price levels that are 15 to 20 percent above what a home would’ve sold for six to 12 months ago.”
Finally, according to the analysts at Zillow Research, home prices will grow 11.6% between May 2022 and April 2023. This is actually a revised projection, down from previous forecasts of 14.9% growth in March. The analysts believe worsening buying conditions will lower demand enough to ease the market’s current price growth, though prices are less likely to fall rather than slow their acceleration upward.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
