In the second half of last year, the U.S. housing market slipped into the first price correction since the housing bust bottomed out in 2012. Through January, national home prices as measured by Case-Shiller have fallen 3% on a seasonally adjusted basis—or 5.1% without seasonal adjustment—since the June 2022 peak.
Out West, the correction was particularly sharp as markets like Phoenix and Seattle saw home prices fall 10.4% and 16.3%, respectively, from their peak. In the eastern half of the country, the correction is much milder as some regional housing markets, including Cleveland, saw prices decline by less than 1% since the peak.
But the story is already changing: As the housing market moves into its busier spring seasonal period, the correction is losing steam.
Indeed, among the 200 largest housing markets tracked by the Zillow Home Value Index, only 38% of major markets notched a month-over-month home price decline in February. At the height of the correction in September, 79% of markets fell on a month-over-month basis.
Why is the home price correction—which was already absent in some Northeast and Midwest markets—losing steam?
For one thing, we've entered the seasonal period where demand picks up. Second, inventory in March was 49.5% below levels hit in March 2019. Third, housing affordability has improved a bit over the past few months as mortgage rates came back under 7% and many markets saw home prices come down a bit.
That said, if mortgage rates remain over 6%, it's possible that the home price correction could regain steam once the housing market exits the busier spring season and enters into the slower season in the second half of the year.
To better understand where national home prices might head next, Fortune rounded up revised forecasts from seven major research firms.
CoreLogic: The real estate research firm expects U.S. home prices, as measured by the CoreLogic HPI, to rise 3% between January 2023 to January 2024. If CoreLogic is right, then U.S. home prices would end 2023 back at price levels achieved at the height of the boom in June 2022.
Zillow: Economists at the home listing site forecast that U.S. home values, as measured by the Zillow Home Value Index, will rise 1% between February 2023 and February 2024. Here is Zillow's regional outlook for over 300 markets.
Mortgage Bankers Association: The trade group's latest forecast has U.S. home prices, as measured by the FHFA US House Price Index, falling 0.6% in 2023 and another 1.4% dip in 2024. It then expects national home prices to rise 2.1% in 2025. "While we would still characterize the path for the national home price index as flat, we are now forecasting several quarters of year-over-year declines in the level of national home prices. We had already been expecting some pretty significant declines in the West and Mountain regions of the country," write researchers at the Mortgage Bankers Association.
Goldman Sachs: The investment bank expects U.S. home prices, as measured by Case-Shiller, to fall 2.6% in 2023. That'd take us, Goldman Sachs says, to a 6% peak-to-trough decline. "On a regional basis, we project larger declines across the Pacific Coast and Southwest regions—which have seen the largest increases in inventory on average—and more modest declines across the Mid-Atlantic and Midwest—which have maintained greater affordability over the past couple years," write Goldman Sachs researchers.
Fannie Mae: Economists at the firm predict that U.S. home prices, as measured by the Fannie Mae HPI, will fall 4.2% in 2023 and another 2.3% dip in 2024. Fannie Mae is currently modeling an average 30-year fixed mortgage rate of 6.5% in 2023 and 5.9% in 2024.
Moody's Analytics: The firm expects U.S. home prices, as measured by the Moody's Analytics Repeat Sales House Price Index, to fall 4.2% between the fourth quarter of 2022 and the fourth quarter of 2023. In total, Moody's expects a peak-to-trough U.S. home price decline of 10%. If a recession were to manifest, Moody's would expect a top-to-bottom home-price drop of 15% to 20%.
KPMG: The Big Four accounting firm expects U.S. home prices, as measured by Case-Shiller, to fall 8% in 2023. If KPMG's latest forecast is right, the U.S. housing market in 2023 would soon experience its sharpest home price decline since 2008, a year that saw national home prices plummet 11.9%.
The chart below shows the range between the most bullish 2023 forecast (via CoreLogic) and the most bearish 2023 forecast (via KPMG).
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