Home prices have remained stubbornly high this year, even amid high lending rates and falling housing demand. Therefore, housing market price forecasts are the focus of many investors and potential buyers.
Despite unfavorable market conditions, real estate in the United States remains in turmoil. 30-year fixed mortgage rates are hovering around 6.3%, near their highest level in more than a decade. As a result, mortgage applications are down more than 50% from a year ago, reflecting rapidly declining housing demand. Yet house prices only seemingly continue to rise.
According to the National Association of Realtors, the median price of existing homes rose nearly 15% year over year to $407,600 in May. This represents the highest level in its recorded history, dating back to 1999. About 60% of homes sold in May closed above their listing price, according to Redfin. Even though home sales fell 3.4% from April to May and 8.6% from a year ago, home prices continue to climb.
Some economists expect that eventually, as interest rate hikes continue to drive up mortgage rates, house prices will respond appropriately to weaker housing demand. However, given the structural mismatch between housing supply and demand in the United States, the answer may not be as drastic as some hope.
Let’s see what the experts think of house prices going forward this year.
Housing market price forecasts
Ralph DiBugnara, president of Home Qualified, believes that the notion of worsening future buying conditions will likely lead to a near-term increase in demand for homes, leading to higher prices:
“The summer market will remain elevated primarily due to an increased urgency to buy…This urgency is being driven by fears of another rate hike and more homes coming onto the market as more sellers want to pull benefit from the equity they have acquired over the past few years.”
Meanwhile, Greg McBride, chief financial analyst at Bankrate, predicts an imminent drop in demand. However, McBride also doubts that the lack of supply will support a comparable easing in house prices:
“Even residential construction activity is slowing due to supply constraints and cooling demand… But as the market cools, prices don’t necessarily go down. We’ll still see higher home price levels 15 to 20% to what a house would have sold six to 12 months ago.
Finally, according to analysts at Zillow Research, house prices will increase by 11.6% between May 2022 and April 2023. This is actually a revised projection, down from the previous growth forecast of 14, 9% in March. Analysts believe that deteriorating buying conditions will reduce demand enough to dampen current market price growth, although prices are less likely to decline rather than slow their upward acceleration.
As of the date of publication, Shrey Dua did not hold (either directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.