By CHUCK GREEN
Next time you run into someone in the local Starbucks who happens to have their home on the market, be a sport and plop an extra scone into their bag, huh? A little butter and jam, too?
After all, sellers probably aren’t riding the wave of a sugar high induced by whatever they will pocket in their real estate transactions as experts say the price of an average home in the United States is decreasing.
The cities expected to be the most heavily hit include:
San Francisco: -10.36%
Seattle: -9.55%
San Diego: -7.24%
Los Angeles: -5.61%
Denver: -5.60%
Dallas: -4.34%
Portland: -4.25%
Las Vegas: -3.69%
What is contributing to the drop in housing prices?
B. George Ratiu, senior economist and manager of economic research at Realtor.com said that homes are spending a longer time on the market than they were when housing was red hot.
“With diminished foot traffic and dropping transactions, homes have been spending more days on the market, leading sellers to resort to price cuts to close deals. The share of listings on Realtor.com seeing price reductions reached 20% in November 2022,” Ratiu said.
In turn, prices dropped 10% from their June 2022 peak, even though they remained higher than the prior year, Ratiu continued.
“As we move through the winter months, buyers and sellers are assuming a wait-and-see position,” Ratiu said. “The next three months are expected to provide more clarity on the economy, job market, and interest rates, and in turn, give buyers and sellers more confidence in their own options.”
Despite the market changes, homeowners still stand to benefit if they decide to sell.
Nadia Evangelou, senior economist and director of forecasting at the National Association of Realtors, told The Mortgage Note that homeowners have built a substantial amount of housing wealth.
The median-priced home has appreciated consistently in the last 10 years. And a flurry of activity during the pandemic accelerated an exponential increase in values.
This has been dampened in recent months, with the annual single-family home price growth dipping in Q4 2022, but homes are still growing in value.
“Although price gains have recently eased, home prices continue to be higher than the previous year,” Evangelou said.
The price of homes is growing the most slowly in the following places:
District of Columbia: 1.8%
Oregon: 7.6%
California: 7.6%
Minnesota: 7.7%
Louisiana: 8.3%
Evangelou predicts that with mortgage rates stabilizing below 6% this year, more buyers will be back in the market, but warns inventory will remain tight.
Rick Sharga, executive vice president at ATTOM, agrees with Evangelou.
“Selling into a flat or declining market and taking on a mortgage with a higher interest rate just doesn’t make sense for most sellers, so it’s likely that we won’t see a jump in inventory levels, which will help protect prices from falling further or faster,” Sharga told The Mortgage Note.
Sharga predicts that 2023 is going to be a rough year in terms of home sales and mortgage originations with the second half of the year being slightly better than the first half.
Market recovery will probably improve in 2024, assuming that the Federal Reserve feels like it’s gotten inflation under control, and can adjust its Fed Funds Rate policies accordingly, Sharga said.
Then there’s the X-Factor, which is whether or not the U.S. Economy enters a recession in 2023, and if so, how long and severe it is.
“A deep, severe recession could wreak further havoc on the housing market, which certainly won’t be good news for the mortgage industry either,” Sharga said.
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