The U.S. housing market is clearly in a slump, as evidenced by the chart below of existing home sales—taken from data compiled by Trulia1:
Several factors have influenced the rise in mortgage rates, but the most notable one is that they've been climbing at their fastest pace since 1989.
In the recent shift in mortgage markets, both buyers and sellers have been whipsawed by incentives to wait versus enter. Where the housing market is headed next, no one knows—forecasters are all over the map on this subject.
Consulting firm KPMG believes that U.S. housing prices could fall by 20% in 2023; Goldman Sachs expects homes to dip 7.5%, but the National Association of Realtors anticipates an increase of 1.2%.
There is a wide dispersion of forecasts among industry watchers in assessing the job market, interest rates, and the possibility of an economic recession—and therefore how these factors will affect housing markets.
It is important for investors to keep in mind this dispersion in forecasts as they put together their investment strategy. Regardless of whether or not someone is investing directly into real estate, a thoughtful consideration of how the real estate space affects other industries is important to consider.
1 Wall Street Journal. December 7, 2022.
2 Fred Economic Data. 2022.