In late 2022, headlines claimed that home prices were going to fall dramatically in 2023, speculating a rerun of 2008’s housing crash. The headlines got it wrong.
There was in fact, a slight home price correction after the sky-high price appreciation during the “unicorn years” and, national home prices did not come crashing down. They were actually a lot more resilient than many expected, even for those experts who were overly pessimistic.
This chart shows the 2023 forecasts from leading industry organizations, both their original forecasts for 2023 (released late 2022) and their recently revised 2023 forecasts.
The red in the middle column indicates that original forecasts called home prices to fall. However, on the right, it is apparent that all experts have updated their projections for the year-end to show they expect prices to either be flat or have positive growth. This a significant change from the original negative numbers.
There are a number of reasons why home prices are so resilient to falling. As Odeta Kushi, Deputy Chief Economist at First American states:
“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.”
Regarding future headlines ~ there will very likely be negative, misleading media coverage in the months to come, due to the seasonality of home price appreciation. This concept is misunderstood by many, and it can be explained a little more clearly, as follows.
As activity in the housing market slows at the end of this year (as it typically does each year), home price growth will slow too, but this doesn’t mean prices are falling. They are just not increasing as quickly as they were, when the market was in the peak homebuying season. Basically, deceleration of appreciation is not the same thing as home prices depreciating.
National headlines do have an impact, even if they’re inaccurate and even untrue. While the media said home prices would fall significantly in their coverage at the end of last year, that didn’t happen. It is best to have a trusted resource to help you separate fact from fiction with reliable data.
Graph courtesy of Keeping Current Matters