Earlier this year, I argued the most likely path for house prices was for nominal prices to “stall”, and for real prices (inflation adjusted) to decline over several years. The arguments for a stall included historically low inventory levels, mostly solid lending over the last decade, and that house prices tend to be sticky downwards.
As I noted, homeowners resist selling for less than the recent sale prices of similar homes in their neighborhood. However, there are always the homeowners that need to sell (death, divorce, moving for employment, etc.), and sometimes these homes will sell for less than previous sales. Note that house prices were not sticky downwards during the housing bust due to the all the forced sales. (...)
10%+ Nominal Price Declines Now Seem Likely
Since national house prices increased very quickly during the pandemic - up over 40% - it seems likely that some of the usual “stickiness” will not apply. I think the most likely scenario now is nominal house prices declining 10% or more from the peak, and real house prices declining 25% or so over the next 5 to 7 years.
by Bill McBride, Calculated Risk | Read more:
Image: www.calculatedriskblog.com
[ed. See also: Office Markets Are the Real Estate Crash We Need to Worry About (Bloomberg).]
[ed. See also: Office Markets Are the Real Estate Crash We Need to Worry About (Bloomberg).]
