Home News Capital Economics reports US home prices to sink by 2023 as mortgage rates hit 6%

Capital Economics reports US home prices to sink by 2023 as mortgage rates hit 6%

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Highs in the US home market will fall in the coming months as future homebuyers struggling to raise money will fight the mortgage surge, a prominent research firm said in a report on Monday.

House prices are projected to fall by about 5% by mid-2023, according to the latest forecasts released by. Capital economics.. Previously, property values ​​were expected to remain unchanged over the same period.

The company has revised its home price outlook in response to the recent rise in mortgage rates.30-year fixed mortgage rates reached 6.03% on Monday, according to data from Mortgage News Daily.. The same mortgage rate fell below 3.5% in January recently.

“The deterioration of affordability will keep many potential buyers out of the market,” Pointon wrote in a report. Bloomberg.. “It will reduce competition for homes, and sellers will eventually see the need to accept lower prices for their property.”

So far, the average homebuyer who buys real estate at an average price spends more than a quarter of his annual income just to pay his mortgage, according to Capital Economics calculations.

Demand for mortgage applications has reached its lowest level in 22 years.
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House prices are expected to fall in the wake of the pandemic era, but the company does not expect a complete plunge. Current forecasts require rapid recovery of values ​​and an annual increase of 3% by 2024.

“Fixed-rate mortgages for the entire term, tight credit conditions, and a relatively healthy labor market still eliminate price plunges,” said Matthew Pointon, senior property economist at Capital Economics. Stated.

According to the report, the average selling price of a single-family home in the United States was $ 428,700 by the first quarter of 2022. To federal data..

As Posts reported last weekThe average contract interest rate on 30-year fixed rate mortgages, tracked by Freddie May, recorded the largest weekly rise since 1987. Interest rates are almost double what they were a year ago.

Rising interest rates reduced the number of mortgage applications, hitting a 22-year low. Early this month.. More expensive mortgages deprive potential homeowners of purchasing power.

Interest rates have risen steadily as the Federal Reserve raises benchmark rates to combat rampant inflation. Recently, there has been a significant increase of three-quarters percentage points over normal.

Federal Reserve rate hikes do not directly affect mortgage rates, but all forms of borrowing are more expensive as markets adapt to the expectations of monetary tightening policies and the resulting potential recession in the U.S. economy. It has become.

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