Fifteen years ago, Tom Lawler, a former economist for Fannie Mae, foresaw the popping of the housing bubble that preceded the Great Recession, and over a decade later, he’s making another big prediction for 2023: falling home prices. After two years of accelerated household formation, market demand is slowing, and rising rates are further exacerbating that trend.
As a result, Lawler predicts that U.S. home prices could fall between 8% and 12% over the next two years, a major correction that Bloomberg says is already underway. Median existing home prices fell 8.4% nationally from their June peak of $413,800 to roughly $379,100 in October.
On top of household formation slowing, interest rates have risen dramatically this year, lifting mortgage rates at one point to their highest level in two decades, which increases ownership expenses for most buyers.
“If a lot of the special factors that you’re talking about fade away, at least partly, then as you had a two-year explosion in prices you could see a period where home prices either stagnate or more likely fall for a couple of years,” Lawler said.
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