Home Prices Fall
With higher mortgage rates, borrowing costs, and general prices for goods and services across the country, the housing market has had its series of supply and demand woes. Now, it is certain that the Federal Reserve’s attempt to decrease prices with higher interest rates is influencing a significant portion of the United States real estate market. In the first quarter, roughly a third of metropolitan areas posted home price declines, reaching levels of mass reductions not seen in over a decade. On an annual basis, prices declined by 31% in all 221 metro areas tracked by the National Association of Realtors (NAR). The NAR did, however, claim that these price reductions solely are in expensive markets, with more affordable housing markets continuing to depict higher selling prices.
The unaffordability of the housing market began during the pandemic when a housing boom surged into large demand, higher prices, and limited inventory. The NAR does believe there is a chance for the declines in prices to be reversed as inventory continues to shrink. Ian Shepherdson, a chief economist who predicted the 2008 housing crisis, believes a recession would trigger the entirety of American home prices to fall another 15%. Furthermore, he feels falling mortgage rates may be able to bolster inventory levels, but a lack of demand stimulated by tight credit conditions wouldn’t be able to keep prices stable. Nevertheless, the fate of the housing market will rely on inflation and the Fed’s fiscal policy, which will continue to unfold throughout the next several months.
Want to learn how to invest? Download the Invstr app, where you can play Fantasy Finance and manage a virtual investment portfolio or open a brokerage account and invest for real. Take our interactive investing course on Invstr Academy and become a better investor today!
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
