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Wall Street: U.S. housing market to see second biggest price decline since Great Depression

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Nationwide housing price declines are rare, but it happens sometimesIt occurred in the early 1980s and then again in the early 1990s, most notably in 2008 housing crashThat said, sharp declines in home prices are incredibly rare. The only time national home prices fell into his double digits was during the Great Depression and Great Recession.

That history, or lack of history, is why the recent outlook released by the Wall Street giant has been frowned upon. Not only is consensus building on Wall Street, House prices have entered a period of declineHowever, there is also consensus that it will be the second steepest decline in housing prices since the Great Depression.

See what financial giants expect US house prices I’ll go next.

Morgan Stanley: US house prices fell 7%

last week, Morgan Stanley Finally joined the herd of residential bears. Investment banks now expect US home prices to fall 7% by the end of 2023. This is much smaller than the 27% peak-to-valley decline experienced by the country between 2006 and 2012. , which is twice as large as his peak-to-valley decline of 3.1% recorded in the early ’90s. In fact, if Morgan Stanley’s forecast comes true, it would be the second biggest drop since the Great Depression.

culprit? Soaring mortgage ratescoupled with Unprecedented home price riseput affordable prices on the upper end of history.

“Assuming a 7% mortgage rate, affordability looks significantly worse than it is today, and the pace of that slowdown is comparable to almost any time in history. have already more than doubled,” writes the Morgan Stanley researcher. “The positive points we see show the importance of this. [7% forecasted home price] This drop will only bring home prices back to January 2022 levels. That’s still home prices 32% above his March 2020 levels. “

Remember, the 7% decline is Morgan Stanley’s “base case” projection. Investment banks have also issued “bull cases” and “bear cases”.If mortgage interest rate If things return to normal by next spring (Morgan Stanley bull case), US house prices could rise 5% in 2023. may exceed 10%.

“Affordability is already being challenged, and prospective homeowners are being exposed to a rent environment that impairs their ability to save for a down payment. We can imagine a scenario in which GDP continues to fall below the Global Financial Crisis (GFC).

Goldman Sachs: U.S. Home Prices Fall 5% to 10%

Since the weakened housing data came out little by little this summer, goldman sachs confirmed its positive outlook for 2023 house prices. Well, that was until it collapsed last week.

From peak to trough, Goldman Sachs now expects US home prices to fall 5% to 10%. This is a significant downward revision from Last month, when investment banks forecast U.S. home prices to rise 1.8% in 2023.

The researchers at Goldman Sachs said: “Risks to these estimates are skewed to the downside, as descriptive scores for the house price outlook have deteriorated sharply and regional data show evidence of a significant setback in averages. I think there are,” he said.

Simply put, Goldman Sachs acknowledges that its outlook for 2023 may still be conservative.

Moody’s Analytics: U.S. Home Prices Fall 5% to 10%

Good Mortgage Underwriting. Plain Vanilla Lending. Record low vacancy rate. That’s why Moody’s Chief Economist Mark Zandy says we’re not headed for a 2008-style housing crash.But improved lending practices and a tighter housing supply alone will not be enough to prevent an ongoing house price correction, Zandi said. Fundamentals, he says. too far from reality.

from peak to valley, Moody’s Analytics expects US home prices to fall 5% to 10% Even if there is no recession. Moody’s Analytics predicts that US house prices will fall 10% to 15% if the US goes into recession. Either way, Zandy said it will likely be 12 to 18 months before prices hit bottom.

When groups like Moody’s Analytics and Goldman Sachs say “U.S. housing market” or “U.S. housing prices,” they are talking about the overall view of the country.At the regional level, these results vary. .of Home price adjustments in progress No exceptions.

Every quarter, Moody’s Analytics assesses whether local fundamentals, including local income levels, can support local home values. Moody’s Analytics considers a region’s housing market to be ‘significantly overvalued’ if it is ‘overvalued’ by 25% or more. Throughout the second quarter of this year, 210 of the nation’s largest 413 rural housing markets fell into the ‘severely overvalued’ camp.

face forward, Moody’s Analytics predicts a 10% to 15% decline in home prices in the “massively overvalued” housing market. If there is a recession, Moody’s Analytics expects these home price declines to widen to 20% to 25% in a “massively overvalued” housing market..

Fitch Ratings: U.S. Home Prices Could Fall 10% to 15%

a few weeks ago, Fitch Ratings Finally Releases Housing OutlookThe Big Three credit rating agencies are clearly bearish.

“There is a growing likelihood that the U.S. housing market will enter a deep recession. We expect a more moderate pullback.” A Fitch Ratings researcher wrote on Tuesday“We recently confirmed the ratings and stable outlook for U.S. homebuilder portfolios, but ratings are likely to decline by 10% to 15%, with housing activity down about 30% or more over a multi-year period.” , could face pressure under a more pronounced downside scenario in house prices.”

Of course, if house prices actually fell by 10% to 15%, luck may rebrand pandemic housing boom. pandemic housing bubble sounds more appropriate.

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