Oops! Home Prices Didn’t Crash After All
During the final quarter of the previous year, a number of housing experts set forth dire predictions about the imminent crash of home prices this year. However, as the data now shows, the market has proven to be more resilient than anticipated.
Expert Predictions: The Forecasted Fall
Among those forecasting a sharp decline in housing prices were:
Jeremy Siegel, Russell E. Palmer Professor Emeritus of Finance at the Wharton School of Business:
“I expect housing prices fall 10% to 15%, and the housing prices are accelerating on the downside.”
Mark Zandi, Chief Economist at Moody’s Analytics:
"Buckle in. Assuming rates remain near their current 6.5% and the economy skirts recession, then national house prices will fall almost 10% peak-to-trough. Most of those declines will happen sooner rather than later. And house prices will fall 20% if there is a typical recession.”
“Housing is already cooling in the U.S., according to July data that was reported last week. As interest rates climb steadily higher, Goldman Sachs Research’s G-10 home price model suggests home prices will decline by around 5% to 10% from the peak in the U.S. . . . Economists at Goldman Sachs Research say there are risks that housing markets could decline more than their model suggests.”
The Impact: Consumer Confidence Shaken
The predictions were hardly encouraging, and understandably, they managed to instill a significant degree of doubt among consumers regarding the health of the residential real estate market. This was reflected in Fannie Mae's December Consumer Confidence Survey, which reported a record number of Americans believing home prices would fall over the next year. This uncertainty led to many rethinking their homebuying or selling plans for the new year.
The Reality: Home Prices Stand Their Ground
Contrary to the gloomy forecasts, home prices did not take a plunge. In fact, they appear to be recovering swiftly from the minor depreciation seen over the recent months.
A recent report from Goldman Sachs points to a quick stabilization of the global housing market, defying initial predictions. They noted, “House prices are rising in major economies such as the U.S...”
This conclusion is further corroborated by the recent release of two home price indexes: Case-Shiller and the FHFA. Both indicate a steady increase in home values.
Bottom Line: A Stronger Market Than Perceived
In spite of the initial concerns and predictions, the housing market has proven to be much stronger than many assumed. For an accurate evaluation of your local market, consulting with a trusted real estate professional is highly recommended. It turns out, the doomsday predictions about the housing market were a bit premature. The home prices didn't crash after all - a pleasant surprise for homeowners and potential buyers alike.
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