The U.S. housing market is expected to continue its decline, with new home sales expected to fall 8% next year, second home sales down 14% and real estate GDP down 9.2%.
With the rising cost of loans, U.S. home sales are down more than 20 percent compared to a year ago.
According to NAR data, the median price of an existing U.S. home fell from a record $413,800 to $403,800 last month.
Considering that median U.S. home prices have soared nearly 36 percent since the epidemic and prices have fallen about 2.4 percent in a month, a storm is coming.
This bubble in the U.S. housing market will be the worst in history, and will even surpass 2008.
Adjusted for inflation, current home prices are already higher than the peak before the last housing crisis.
Especially in the Southeast, such as Charlotte, home prices are expected to fall 27%.
Another is the U.S. mountains, such as Salt Lake City, Utah, where a 28 percent decline is expected.
One of the biggest housing bubbles this time around will be Austin.
Home prices in Austin are predicted to fall 35%, from $594,000 to $390,000.
A major reason for the plummeting home prices in Phoenix is that the income levels of local residents cannot support such high prices.
Take for example the home price/income ratio before the crash in 2007. The house price was $273,000, the per capita income was $34,000, and the house price to income ratio was 8 times.
Then Phoenix home prices plummeted and the home price/income ratio fell all the way to 3.3. From 2014 to 2019, it only recovered to about 5.5.
Now the median home price in Phoenix is $480,000 and the median household income is $52,000, giving a home price/income ratio of 9.2.
In fact, in many areas, home prices have not dropped significantly. On the contrary, home prices have held up modestly over the past two months as interest rates have become increasingly stable and the stock market has rebounded.
There are also optimistic predictions that home prices could rise through 2023.
According to NAR's latest forecast, home prices are expected to rise 11% in 2022 and 2% in 2023.
This is because housing demand remains strong, employment figures remain strong and housing supply is inadequate.
For some real estate markets that have experienced significant price increases in the past few years, such as California and Texas, the current price declines did occur.
In July, San Jose home prices fell 4.5%, Phoenix fell 2.8%, San Francisco fell 2.8% and Austin fell 2.7%.
But this decline is likely to be short-lived, as price declines will be seen as a second chance by owner-occupied homebuyers who were previously pushed out of the market due to overpricing.
For those who have not experienced significant price increases and have better affordability, prices will hardly fall and will continue to rise as supply remains inadequate.
This is especially true for loans. The Fed's determination to curb inflation makes it likely that interest rates will rise, but they are unlikely to fall.
