Towards the end of the previous year, there was a flurry of headlines predicting a substantial decline in home prices for 2023. This sparked widespread concern and raised questions about the possibility of a housing crash akin to the one experienced in 2008. However, as it turns out, those headlines missed the mark.
Although there was a modest correction in home prices following the remarkable price surge during what some dubbed the 'unicorn' years, national home prices did not experience a catastrophic plunge. In fact, they displayed remarkable resilience, defying many people's expectations.
Let's delve into the forecasts made by experts late last year and compare them to their most recent predictions. This will demonstrate that even the experts themselves now acknowledge their earlier pessimism may have been misplaced.
Expert Home Price Forecasts: Then and Now
The chart below showcases the 2023 home price forecasts from seven prominent organizations. It presents their initial 2023 projections, released in late 2022, regarding what would happen to home prices by the end of the current year. Additionally, it provides their most recent revised 2023 forecasts.
As indicated by the red figures in the middle column, all experts initially predicted a decline in home prices. However, a glance at the right column reveals that they have since adjusted their projections for year-end, now expecting prices to remain stable or experience positive growth. This represents a significant departure from their initial negative outlook.
Several factors contribute to the remarkable resilience of home prices. According to Odeta Kushi, Deputy Chief Economist at First American:
"One thing is for sure, having long-term, fixed-rate debt in the U.S. protects homeowners from payment shock, acts as an inflation hedge - your primary household expense doesn't change when inflation rises - and is a reason why home prices in the U.S. are downside sticky."
Looking Ahead to Stay Informed
In the coming months, you can anticipate continued misleading media coverage related to home prices. This is due to the seasonality inherent in home price appreciation, which is often misunderstood. Here's what you should keep in mind to stay ahead of the next wave of negative headlines.
As the activity in the housing market naturally slows towards the end of each year, home price growth also decelerates. However, this does not imply that prices are dropping; rather, they are not rising as rapidly as they did during the peak homebuying season.
In essence, a decrease in the rate of price appreciation is not synonymous with home price depreciation.
Headlines, whether accurate or not, can have a significant impact. Despite media predictions of a substantial home price decline at the end of last year, this scenario did not materialize. It's important to connect with a trusted resource that can help you discern fact from fiction, relying on reliable data to make informed decisions.