Could Falling Home Prices Push the Economy Into a 2023 Recession?

While some experts argue that the U.S. housing market has already bottomed out, others anticipate an even more substantial deceleration in the second half of the year, possibly leading to an economic recession. Researchers at Vanguard say home prices could fall 5% by the end of 2023, but the pace of a housing slowdown depends largely on the likelihood and frequency of more rate hikes by the Federal Reserve.

Researchers also expect the housing market to rebound in 2024 amid more favorable demographic trends, rising sentiment toward homeownership, and stronger borrower fundamentals, Insider reports.

The rate-sensitive real estate sector will weaken as the year goes on, representing an early sign of the effects that Federal Reserve rate hikes are having on the economy, strategists wrote in a recent note.

"The housing downturn is part of the reason why we view a mild U.S. recession in 2023 as most likely," Vanguard said.

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