Home prices have been on a rapid ascent over the past several years. This leads to fierce buyer competition and dwindling inventory. Of course, prices can not continue this same trajectory forever. In addition, a 40-year high in inflation is also forcing the Federal Reserve to take some aggressive measures with interest rate hikes. In fact, over the past several months we have seen mortgage interest rates rise from the low 3% range to over 5%! This rapid pace of interest hikes points to both the severity of inflation as well as the aggressive measures being taken by the Federal Reserve. As for the future of home prices, the predictions can vary depending on the economist. We discuss a few predictions below.
Where are home prices heading in the short term?
We are currently in the midst of the spring home buying season. Therefore, we typically see higher buyer demand during these months. Many families plan to move during the summer months while their children are out of school on summer break. Of course, we are also in the midst of record-low inventories of homes for sale throughout the country.
As for home price expectations, most economists are still predicting robust annual home price growth for the remainder of the year. For the next several months, annual home price growth estimates range from the 14% range to over 22%! Not surprisingly, these estimates are highly correlated to the persistent buyer demand combined with the decreasing inventory of homes for sale. Nonetheless, as mortgage rates continue their rapid ascent, we will also see less buyer demand as a result.
Where are home prices heading in the long term?
With the Federal Reserve raising interest rates considerably faster than originally expected, many real estate economists are adjusting their home pricing forecasts downward some. For example, Zillow originally predicted 17.8% between March 2022 and March 2023. However, now Zillow predicts that U.S. home prices would rise 14.9% between March 2022 and March 2023. Meanwhile, the Fannie Mae Economic and Strategic Research Group predicts a more modest price growth of 3.2% through the fourth quarter of 2022. Lastly, CoreLogic predicts that home prices are set to decelerate to a 5% rate of growth.
In closing, home price growth predictions range from the low single digits through nearly 20% for the coming year. It is important to note that these are national average predictions. As always, all real estate is local and therefore your local market may vary widely. As for South Florida, we continue to see higher demand from out-of-state buyers. This is likely to persist for the foreseeable future. Therefore, home price growth may likely exceed the national average. The biggest challenge currently in the South Florida market is the lack of inventory in combination with affordability headwinds. As more buyers move into the area from more expensive markets, home prices are being driven up and thus presenting significant challenges for South Floridians to compete in the housing market.
At Live South Florida Realty, Inc. we have assisted many clients with their real estate needs. Are you looking to buy or sell a property in South Florida? Now more than ever, it is critical to have a qualified real estate team and the proper search tools behind you. Live South Florida Realty, Inc., is a leader in the South Florida market . Let our team of professionals assist you with buying or selling your piece of paradise today!
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