During the fourthquarter of last year, many housing experts predicted home prices were going to crash this year. Here are a few of those forecasts:
Jeremy Siegel, Russell E. Palmer Professor Emeritus of Finance at theWharton School of Business:
I expect housing prices fall 10% to 15%, and the housing prices are accelerating on the downside.
Mark Zandi, Chief Economist atMoodys 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 Researchs G-10 home price model suggestshome 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 Bad News: It Rattled Consumer Confidence
These forecasts put doubt in the minds of many consumers about the strength of the residential real estate market. Evidence of this can be seen in theDecember Consumer Confidence SurveyfromFannie Mae. It showed a larger percentage of Americans believed home prices would fall over the next 12 months than in any other December in the history of the survey (see graph below). That caused people to hesitate about their homebuying or selling plans as we entered the new year.
The Good News: Home Prices Never Crashed
However, home prices didnt come crashing down and seem to bealready reboundingfrom the minimal depreciation experienced over the last several months.
In a report just released,Goldman Sachsexplained:
The global housing market seems to be stabilizing faster than expected despite months of rising mortgage rates, according to Goldman Sachs Research.House prices are defying expectations and are rising in major economies such as the U.S.,. . .
Those claims fromGoldman Sachswere verified by the release last week of two indexes on home prices:Case-Shillerand theFHFA. Here are the numbers each reported:
Home values seem to have turned the corner and are headed back up.
Bottom Line
When the forecasts of significant home price appreciation were made last fall,they were made with megaphones. Mass media outlets, industry newspapers, and podcasts all broadcasted the news of an eminent crash in prices.
Now, forecasters are saying the worst is over and it wasnt anywhere near as bad as they originally projected. However,they are whispering the news instead of using megaphones. As a Seven Gables real estate professionals, it is our responsibility some may say duty to correct this narrative in the minds of the American consumer.
