This deceleration is a clear signal that buyers are dialing back their demand for homes in the face of daunting affordability challenges," wrote Zillow economists in their latest outlook. "The trend appears to show that the market passed an inflection point for home values between April and May, transitioning from ever-hotter to somewhat-cooler price growth. After all, that would still be double the average annual home price appreciation (4.4%) posted since 1987. While that would mark a significant deceleration from the 20.4% posted over the past year, it would hardly be a relief for buyers. Between May 2022 and May 2023, Zillow predicts U.S. That said, the industry is split on where this declaration will take us. home prices? To find out, Fortune examined revised housing forecasts published by Capital Economics, Mortgage Bankers Association, Fannie Mae, CoreLogic, Moody's Analytics, and Zillow. What does this "housing correction" mean for U.S. Some borrowers-who must meet lenders' strict debt-to-income ratios-have lost their mortgage eligibility altogether. Those higher mortgage rates mean that homebuyers are finally feeling the full-brunt of record home price appreciation. housing market-which has seen home prices spike 39.8% since March 2020-into a full-blown housing correction. This swift move-up in mortgage rates has pushed the U.S. As a result, financial markets pushed up the average 30-year fixed mortgage rate from 3.1% to 5.7% over the past six months.Ĭentral bankers knew what they were doing. This year, the Fed transitioned to bond selling (i.e. That saw financial markets push mortgage rates to historic lows. During the early weeks of the pandemic, the Fed kicked off an unprecedented bond buying spree (i.e. The Fed doesn't set mortgage rates, however, it has the levers available to put upward or downward pressure on mortgage rates. That's why the Federal Reserve pulled the housing e-brake: mortgage rates. In the eyes of the Fed, it's time to stop that Pandemic Housing Boom. Of course, an elevated builder demand for steel, lumber, and refrigerators only put further stress on an already maxed out global supply chain. It also saw builders push homebuilding to levels not seen since 2006. Soaring home prices gave landlords an opening to jack up rents. It translated into fierce bidding wars and double-digit home price growth. Elevated homebuyer demand during the pandemic simply overwhelmed inventory. There's no doubt about it: The Pandemic Housing Boom was an inflationary engine.
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