Property prices continue to rise, with median existing-home prices up 4.4% over last year, according to the National Association of Realtors (NAR). This marks the sixth consecutive month of year-over-year increases. The main reason for this upward trend is the lack of housing supply, with NAR’s December data showing only a 3.2-month supply.
Despite high mortgage rates, experts like Rick Arvielo, head of mortgage firm New American Funding, believe that house prices will not decline due to the limited inventory. Skylar Olsen, chief economist at Zillow, also agrees that the supply-and-demand imbalance will cause home prices to keep rising into 2024.
Although the housing market is cooling, the current slowdown is unlike previous real estate downturns. Home sales have dropped, and inventories of homes for sale have fallen sharply. However, the supply of homes for sale remains tight, preventing a significant market correction like the one experienced during the Great Recession.
Economists and analysts agree that any market correction will likely be modest, with no expectation of price drops on the scale of the declines experienced during the Great Recession. Factors contributing to this outlook include low inventories, cautious construction by builders, strong demand from various demographics, strict lending standards, and muted foreclosure activity.
In summary, while home prices are pushing the bounds of affordability, the current boom is not expected to end in a bust. The housing market will likely continue to experience modest corrections rather than a significant crash.
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