When a buttoned-up Fed economist says the U.S. housing market has entered into a “difficult [housing correction”], it’d be wise to believe them. When it comes from the lips of Fed Chair Jerome Powell, it’s more of a warning.
Powell is right: Not only does housing activity continue to plummet, but U.S. home prices are falling for the first-time since 2012.
Unlike the 2000s housing correction, which saw U.S. home prices fall 27% between 2006 and 2012, this ongoing housing correction isn’t underpinned by bad loans nor by a supply glut. Instead, this correction is driven by what Fortune calls “pressurized affordability.” The Pandemic Housing Boom‘s 43% run-up in U.S. home prices combined with spiking mortgage rates has simply pushed affordability beyond what many borrowers can stomach.
The only levers available to depressurize affordability are for either mortgage rates or home prices to fall. In recent months, we’ve seen the latter.
“Home prices continue to face significant pressure in light of surging costs of borrowing,” Selma Hepp, deputy chief economist at CoreLogic, tells Fortune. “[The] considerable pullback in home buyer demand will continue to weigh home prices down, bringing them closer in line with local incomes.”
Nationally, home prices are down 1.3% from their 2022 peak. At least that’s according to the lagged Case-Shiller reading through August. However, markets like Austin and Reno are down 10.2% and 8.4%, respectively, while markets like Des Moines and Baltimore remain at their all-time highs. (Here’s the shift in the nation’s 400 biggest markets.)
But what’s coming next?
To better understand where regional home prices might go in 2023, Fortune reached out to CoreLogic to see if the firm would provide us with its updated November assessment of the nation’s largest regional housing markets. To determine the likelihood of regional home prices dropping, CoreLogic assessed factors like…
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