Right out of the gate this year, it was clear that the U.S. housing market—which saw a historic decline in home sales in the second half of 2022—was no longer in free-fall mode. The market stabilized around January through a combination of improved buyer confidence, tight supply, and slight declines in home prices/mortgage rates doing just enough to improve affordability.
Fast-forward to April, and it’s looking like the housing market hasn’t just stabilized—it might be returning to growth mode. At least that’s according to CoreLogic.
After seven consecutive months of home price declines, the CoreLogic Home Price Index detected a 0.8% home price uptick in February.
Case-Shiller, the gold standard for home price readings, won’t report its February reading until April 25. However, CoreLogic doesn’t feel obligated to wait for the Case-Shiller reading: The Irvine, Calif.–based real estate data firm is ready to call the national home price bottom.
“U.S. home prices rose by 0.8% in February, double the month-over-month increase historically seen and indicating that prices in most markets have already bottomed out,” writes Selma Hepp, chief economist for CoreLogic. “But while housing market challenges remain, particularly in light of mortgage rate volatility and the ongoing banking turmoil, pent-up homebuyer demand is responding favorably to lower rates in many markets.”
Heading forward, CoreLogic’s forecast model expects U.S. home prices to rise 3.7% between February 2023 and February 2024. For perspective, that’d be just a hair under the 4.6% return home prices have averaged annually since 1987.
Keep in mind, even if national home prices have bottomed, it doesn't mean every market will be insulated. In particular, frothy zoomtowns like Austin and Boise could be vulnerable to corrections in the second half of 2023 if rates remain elevated and inventory begins rising swiftly again as the busy spring season concludes.
“The divergence in home price changes across the U.S. reflects a tale of two housing markets. Declines in the West are due to the tech industry slowdown and a severe lack of affordability after decades of undersupply. The consistent gains in the Southeast and South reflect strong job markets, in-migration patterns and relative affordability due to new home construction," writes Hepp.
Not everyone agrees with CoreLogic.
In particular, firms like Fannie Mae and Moody's Analytics think home prices will fall this year. Heading forward, both firms' respective forecast models have U.S. home prices falling 4.2% between the fourth quarter of 2022 and the fourth quarter of 2023. The reason? Spiked mortgage rates coupled with the Pandemic Housing Boom's run on home prices has simply pushed affordability too far beyond fundamentals.
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