It’s a difficult time to be any kind of investor right now. Bonds are down sharply, as the Federal Reserve continues to hike rates. Equities have been hit, as investors worry about slower demand and valuation compression. And real estate investors remain unsure as to how house prices will hold up in a rising rate environment.
That said, for now, the housing market remains surprisingly robust. Despite rates rising considerably and affordability at its worst level in decades, the supply of homes on the market remains muted. That’s partially because so many homeowners and buyers locked in 30-year fixed mortgages at sub-3% over the past two years. Accordingly, most analysts still think house prices could move higher next year, despite these bearish conditions.
In general, if mortgage rates do top 9%, as many expect will be the case next year, rock-bottom demand could force prices lower. The question is whether a recession will usher in this move in prices or whether strong employment will keep the market elevated.
Let’s dive into where the experts think house prices could be headed in the next two years.
Could House Prices Finally Come Down By 2024?
Interestingly, an expert panel of 107 survey respondents in a Norada Real Estate poll unanimously called for home price deceleration in 2023. That’s a fair and rather obvious call — prices aren’t likely to increase at the same low-interest-rate-fueled pace of 2021.
That said, more than half of those surveyed believe that a big shift in favor of buyers could take place in 2023. Around a quarter believe this shift will come in 2024. Thus, it’s possible a buyer’s market may be right around the corner. That’s great news for those with cash sitting on the sidelines looking to hide out in real estate.
The degree to which house prices could come down is still the big question. A deceleration of growth is different than house price declines. Accordingly, it’s unclear if this shift to a buyer’s market in the real estate sector will take the form of steep discounts.
With that said, experts appear to believe that regional markets in the South and Midwest could get hit the hardest over the next couple years. Additionally, vacation properties and rental properties could see valuation declines as investors look to shore up capital. Like every asset class, there’s always vagaries to consider. Real estate is no different.
On the date of publication, Chris MacDonald did not have (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.
