The Surprising Resilience of Home Prices
In the last quarter of the previous year, numerous housing experts predicted a crash in home prices for the current year. Here are a few of those forecasts:
Jeremy Siegel, Russell E. Palmer Professor Emeritus of Finance at the Wharton School of Business:
"I anticipate a 10% to 15% decline in housing prices, with prices accelerating on the downside."
Mark Zandi, Chief Economist at Moody's Analytics:
"Brace yourselves. Assuming rates stay near their current 6.5% and the economy avoids a recession, national house prices will drop nearly 10% from peak to trough. Most of these declines will happen sooner rather than later. If there is a typical recession, house prices will fall by 20%."
The Downside: Consumer Confidence Shaken
These forecasts cast doubt in the minds of many consumers regarding the strength of the residential real estate market. This uncertainty was evident in Fannie Mae's December Consumer Confidence Survey, which showed that a larger percentage of Americans believed home prices would decrease over the next 12 months compared to any other December in survey history. Consequently, people became hesitant about their home buying or selling plans as the new year began.
The Upside: Home Prices Remain Stable
Contrary to these predictions, home prices did not experience a crash and appear to be rebounding from the minimal depreciation observed over the past few months.
In a recent report, Goldman Sachs explained:
"Despite months of rising mortgage rates, the global housing market seems to be stabilizing faster than expected, according to Goldman Sachs Research. House prices are defying expectations and rising in major economies, including the U.S."
These claims by Goldman Sachs were supported by the release of two home price indexes last week: Case-Shiller and the FHFA. Both indexes reported positive numbers, indicating that home values have turned the corner and are on an upward trajectory.
The housing market is much stronger than initially anticipated. To gain an accurate assessment of your local market, it is advisable to consult a trusted real estate professional.