Home Prices will fall in the US in 2023 and 2024 according to Moody’s predictions. Current home prices dropped 12% from June of 2022 to the end of February this year. With sales falling in 12 of 13 months dating from back to the peck of housing prices last June.
Home demand was hampered by the rise in housing costs during the pandemic’s height and the subsequent rise in mortgage rates once the Federal Reserve started hiking interest rates last March.
According to Freddie Mac, the 30-year fixed mortgage rate averaged 6.32% in the week that concluded on Thursday, up from 4.67% a year earlier. Prices for existing homes decreased from $413,800 in June to $363,000 in February.
According to Moody’s Investors Service experts, they do not anticipate a recovery anytime soon, stating in research that “likely increases in unemployment and a U.S. recession later this year will extra squeeze sales and costs.”
The value of homes in the US has generally trended lower, with differences between markets, following a boom through mid-2022.
They point out that San Francisco, Seattle, Colorado, Las Vegas, Phoenix, San Diego, Portland, and Austin have all seen significant drops in prices. In fairness, some Florida markets and other Southeast states’ values have held up better.
The researchers predicted that housing prices nationwide will drop by around 4% in both 2023 and 2024.
The likelihood of reductions from peak values of 15% to 25% or greater varies across different metro areas and market groups. Also, they anticipate a 20% decrease in new house sales this year.
The analysts predicted that the high levels of housing prices and mortgage rates “would hamper demand for several years.” “Affordability of home purchases has fallen to its lowest level in decades as monthly payments on new mortgages have increased.”
According to real estate company Redfin, only 21% of homes listed for sale last year were within the means of the ordinary American household. A mortgage payment is considered “affordable” if it represents 30% or less of the buyer’s monthly income.
Toll Brothers, a luxury house builder, is one you might take into consideration if you are looking for housing stocks. Morningstar values the stock at $69 and gives the firm no durable competitive advantage. The most recent price was $60.30.
In a note, Morningstar analyst Brian Bernard stated that “Toll Brothers prides themselves on controlling a sufficient supply of some of the best acreage in the industry.”
In combination with opulent, customizable designs, the company’s premium land inventory enables it to charge industry-leading average selling prices.
Three things, in Bernard’s opinion, will help Toll Brothers:
1.The popularity of empty-nester homes and active-adult communities is rising among baby boomers.
2. Growing household wealth should make the company’s luxury products accessible to younger households. 3. Increased demand for entry-level homes may encourage established homeowners to sell their first homes in favor of new move-up homes.
