Anticipated Decrease in Home Prices May Bring Relief to Buyers

The winds of change are blowing in the real estate market, with the possibility of home prices falling. This shift has the potential to offer a sigh of relief for hopeful home buyers, while sellers might face some hurdles.

Significant Market Shift

Notable economic experts, such as Mark Zandi from Moody's, have expressed their analysis and foreseen trends. In a discussion with Yahoo Finance, Zandi conveyed his predictions and the necessary conditions for market stability and growth. He stated, "Mortgage rates need to fall, salaries should continue to rise, we must sidestep a recession, and likely, home prices will have to decline to boost sales."

Expert Consensus on House Price Dynamics

Unsurprisingly, this outlook is shared by others in the field. Glenn Kelman, CEO of the real estate brokerage firm Redfin, expounded on a similar tone during an interview with Fox News. Reflecting on an anticipation of a 3% downturn in home values next year stated by Morgan Stanley, Kelman concurred that price decreases appear probable.

Several factors have contributed to the current slowdown in housing market activities. The Federal Reserve's measures to quell inflation have resulted in rising mortgage rates, which have affected both sellers and buyers. While existing homeowners with lower rates are hesitant to list their houses for sale, prospective buyers are edged out of the market due to affordability issues, waiting for more opportune conditions to emerge.

Housing Sales at a Historical Low

Zandi pointed out the stark decline in home sales, akin to the rates not observed since the financial crisis more than a decade ago. He remarked, "The housing market isn't expected to rebound swiftly, at least not in 2024, and it might take until 2025 or 2026 to see sales return to historical norms."

Conversely, Kelman highlighted some silver linings such as the growth in housing inventory and the onset of price adjustments. He mentioned, "The freezing of the market due to a mismatch in pricing expectations between buyers and sellers is finally thawing, potentially leading to a sales spur thanks to anticipated price reductions."

Real Estate Market and Investment Opportunities

For individuals looking to invest in the real estate segment without direct property acquisition, certain Exchange-Traded Funds (ETFs) present an appealing option. The iShares U.S. Real Estate ETF and the Vanguard Real Estate ETF are notable examples. Additionally, companies like Zillow Group, Inc. (Z) and Redfin Corporation (RDFN) offer stocks that reflect housing market fluctuations.

Old reliables in the sector such as Anywhere Real Estate Inc. (HOUS) and RE/MAX Holdings, Inc. (RMAX) have used their extensive networks and established reputations to keep a strong foothold in the market despite these conditions.

real-estate, economy, investment