The Federal Reserve’s fight against inflation has many questioning the possibility of a housing crash as rising mortgage rates force the U.S. housing market into a sharp slowdown. Analysts are adjusting their 2023 home price estimates down and both the National Association of Home Builders and National Association of Realtors are calling the severe decline a “housing recession.” Industry researchers are not predicting a crash, however, as that would require a decline greater than 20%.
This week, Zillow released an updated forecast for the next 12 months, predicting that U.S. home values will climb 1.4%, 2.4% down from August’s forecast, and 7.8% down from July. Predictions from Zillow of falling home values for the year between August 2022 and August 2023 are changing rapidly, from five regional housing markets in July to 123 regional markets in August, and then in September, projecting that 259 of the nation’s 896 housing markets are likely to see declining home values in the coming year.
“Our view is that you will see—and we’re seeing it right now—home prices will fall even though supply levels are not ripping higher. And I think that’s an interesting thing that is now starting to surprise a lot of people,” Rick Palacios Jr., head of research at John Burns Real Estate Consulting, tells Fortune.
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