Home prices are expected to fall by 8% in the year ahead, but according to Realtor.com, that doesn’t necessarily mean housing affordability is making a comeback. Instead, buyers could continue to lose their purchasing power as mortgage rates remain steady at 7% throughout the remainder of the year, and a potential recession could cause an even more drastic slowdown in home sales and new-construction starts.
Independent research firm Capital Economics predicts that price growth will recover to 2.5% by the end of 2024, aided by a surge in new supply next year as builders chip away at a lengthy backlog of projects delayed by supply chain disruptions, labor shortages, and a worsening housing affordability crisis.
For a median-income household buying a median-priced home, the mortgage payment as a share of income rose to 28.5% in October 2022 from 13.3% in May 2020, the group said.
Mortgage rates will go back down to 5.75% by the end of 2023, the Capital Economics researchers forecast in the report.
The group also expects that the U.S. economy will fall into a “mild recession” in 2023 and that sales of single-family homes will fall to the lowest level since 2011. It also expects single-family-home starts, or new construction, to fall to the lowest level since 2014. The market will recover in 2024, the report said.
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