MINT HILL, NC – The simple answer, according to Fortune.com and many other experts is Yes. Fed Chair Jerome Powell stated back in September 2022 that the U.S. housing market would go through a difficult correction.
With houses going up so fast a few years ago, it became pretty clear it wouldn’t be sustainable. This, along with many other factors have led to the difficult correction mentioned by Powell, which has already begun in the U.S. housing market. Currently, the market is flipping from inflation mode to deflation mode.
The Boom After the Previous Bust
We all remember the crash of 2008 and what happened. Well, from February 2021 to June 2022, home prices have grown. This was a 124-month streak, but it’s over and a new streak has started.
For the past four months (July, August, September, and October of 2022) housing prices have declined in the United States. This is based on the Case-Shiller National Home Index and doesn’t include November or December in 2022 yet.
According to this index, home prices in the U.S. fell 0.3% in October and have fallen a total of 2.4% since June. While this doesn’t seem like much, it’s actually the second-biggest home price correction since the post-World War II era. The only correction that was worse was the 26% decline that occurred from 2007 to 2012.
What to Expect in 2023 and Forward
It’s important to remember, while we call it the crash of 2008, it happened over seral years. The 26% decline in housing prices didn’t all happen overnight. It was over a five-year period before things turned around and started going the other way.
While this decline in prices may not be the same, it has just started. Some experts think it will take into 2024 before the home prices actually bottom out. Moody’s Analytics expect the home prices in the U.S. to fall a total of 10%, if a recession doesn’t hit. However, other experts say the U.S. is already in a recession. Moody’s Analytics predicts a decline of 15% to 20%, with a recession.
While most predictions have to do with the market across the entire country, the correction has already impacted markets differently. For example, in Chicago, home prices are only down 0.95%, while in San Francisco, prices have fallen 11.2% already.
This is mainly due to affordability being a much bigger issue in the Western half of the U.S. compared to the rest of the country. Other markets in the west have seen price declines of about 5% or more.
It’s important to note, even in the markets with the largest price declines, prices are still up compared to pre-pandemic pricing. However, a housing correction has started and expert opinions on how bad it will be range from not that bad to the worst the U.S. has seen in the post-WWII era.
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