“Expect HOME PRICES to Continue to FALL,” - Redfin Chief Economist
"EXPECT HOME PRICES to Continue to FALL," Says Redfin Chief Economist
Redfin’s Chief Economist, Daryl Fairweather, said to “expect home prices to continue to fall” in a recent interview with Yahoo Finance.
Goldman Sachs says housing market growth will slow sharply. In fact, they completely reversed their housing forecast from the beginning of this year.
So why are some economists calling this a “balanced housing market?”
We’ll talk about that and more coming up!
Redfin Chief Economist Daryl Fairweather says, “Homes prices will continue falling through 2022.”
I watched the interview a few times, and she didn’t mention anything about 2023 – at least yet. But from recent comments, some of you have an idea why she’s radio silent on this.
In this video I published in September 2022, ya’ll had a lot to say. Thank you for all the comments. I love hearing from you and replying to as many of you as possible.
So, tell me if you agree with Kristina…
Thanks for commenting Kristina! If you want to check out the video, I'll link it here.
Redfin's Housing Market Forecast
For now, let’s get back to what Daryl had to say.
She cited housing affordability issues with the steep price for the average home and soaring mortgage rates as the cause.
She said, “mortgage rates are so high, homebuyers simply can’t afford their monthly payments. Monthly payments are about 40% up from last year. It’s really hard for buyers to stomach that.”
Yeah, no kidding. Who would be jumping for joy with almost a 40% increase in monthly mortgage payments or other monthly expenses?
I wouldn’t be jumping around, either. Instead, I would be sprinting in the opposite direction unless it looked like it could be even worse than it is currently.
Unfortunately, it does seem like we’re headed in that direction too. Coming up, we’ll take a look at why Goldman Sachs flipped on their housing forecast for 2022 and going into 2023.
But first, let’s get back to Daryl.
The Yahoo Finance post interviewing Daryl talks about the significantly waning homebuyer demand in the current housing market. They mentioned the 63,000 people that backed out of deals in July. In percentage terms, that was a whopping 16.4% of all buyers in a contract that canceled sales. So almost 1 in 5 people bowed out of the market. That’s substantial.
I’m curious to see how the August numbers play out when the data starts rolling in. We’ll talk about it when it does.
So that’s how some buyers respond to the crazy home prices and mortgage rates, but what about sellers? What are they doing?
The post says, “with fewer buyers willing to pay more than the asking price for a home, some sellers are pulling their listings from the market for now.”
Look to me, that’s absurd. Either you have a desire or need to sell a house, or you don’t. But expecting a buyer to pay above the list price for a home is just foolish.
Remember, you will be a buyer or a renter when you sell your house now or later unless you own multiple homes. Would you want to pay above list price for a home? Especially with mortgage rates on the rise? Something to think about, something to consider.
What goes around, comes around – so let’s treat each other right and with kindness.
Alright, so Daryl was asked what she thinks will happen. Here’s what she said.
“Still, the recent pullback in buyer demand is unlikely to cause home prices to plunge so sharply that the market will fall into a housing recession.”
When asked why so many experts are saying we’re already in a housing recession, Daryl answered: “I think ‘housing recession’ is a bit of hyperbole. This is a normal part of the housing cycle. We just had a really hot period. And you know what goes up must come down eventually – that happens in the housing market every so often.”
So if you want to buy a home or sell a house, how will you know when the time is right for you to make your move? What are you watching for and waiting to happen? Let us know in the comments. Thank you.
Goldman Sachs: "Housing Market Growth to Slow Sharply"
Goldman Sachs recently reversed course in their revised housing forecast for 2022 and touched on what their “model” suggests for 2023.
They initially forecast home prices to go up 16% by the end of 2022.
But now, in this post by CNBC, “Goldman Sachs anticipates housing market growth to slow sharply.”
To be honest, I’m not surprised. We discussed this in the 2022 Housing Market Predictions video I created earlier this year. Yeah, I get it – my prediction videos are like a real estate market doctoral thesis. 46 minutes of my nerdiness on display in that one. Lol…
So, when Goldman Sachs says "sharply slow down," how sharp is sharply? Are we talking about home price deceleration or depreciation? To find out, I dug deeper and found a post from Business Insider published on Aug 11th, 2022. In the post, Goldman Sachs says, “We retain our 2022 full-year home price appreciation forecast of 9.4%.
That means they believe home values will be 9.4% more expensive, measured from Jan 1st- Dec 31st, 2022. We’ll see how it plays out.
Flipping from 16% appreciation to 9.4% is pretty big, coming from a major financial market leader like Goldman Sachs. That said, I still believe that the housing market could start seeing declining values by the end of the year, especially in the metros where home price appreciation rocketed to the moon. Time reveals all, and we’ll find out together.
From Daryl’s interview with Yahoo Finance and the flip-flopping reports from Goldman Sachs, why are some economists calling this a balanced real estate market? We’ll talk about that soon.
For now, let’s see what Goldman Sachs crystal ball says about home prices in 2023.
On Aug 31st, 2022, Fortune published a post titled, “The U.S. housing market downturn will be worse in 2023, forecasts Goldman Sachs.”
The post says, “Goldman Sachs expects home price growth to decelerate significantly. The investment bank expects home prices to rise just 1.8% in 2023.”
I don’t know about you, but I’m always curious about what data sets they view when making these forecasts. I tend to look at things from a macro and micro point of view.
I can appreciate their thoughts based on the existing macro reports like the Job Reports, Inflation Rate, Federal Funds Rate, Household Earnings, Consumer Sentiment, and Mortgage Delinquency rates, to name a few.
But, I think they miss the mark from the micro point of view. The micro is where you and I live on that complex financial model they use. The issue is it seems to be out of touch with us.
As a full-time realtor in Las Vegas, NV, I hear and see things from their eyes and listen to their concerns about what keeps them awake at night. I also have the privilege of reading the comments you post on my channel, which sheds various points of view.
According to their findings, I don’t know who they think will buy all the homes at the current prices, much less homes that will be 1.8% more expensive next year.
Many buyers are priced out, especially first-time home buyers and buyers in the middle-income brackets.
Even buyers earning around 100k-150k a year cannot buy homes at the current prices. Add escalating mortgage rates to the mix; the outlook isn’t so peachy.
Think about it. If the average home buyer cannot afford a home, then prices must adjust accordingly.
I’ve often shared that the housing market likely needs to depreciate between 15%-25% to balance out. That’s what I think will happen within the next 24 months.
What do you think will happen to home prices? Let us know in the comments. Thank you.
What is a "Balanced Housing Market?"
So when I read this post from Realtor.com titled, “Economists have a strange new buzzword for the housing that will shock buyers and sellers,” I was curious.
Like, what is the new word of the month now?
In the post, they say, “the lasted word du jour to describe the state of real estate today is almost shocking its tepidness: balanced.”
They referenced 4 economists in their post saying things like this one by Realtor's chief economist Danielle Hale. She said, “the early 2022 enthusiasm that homeowners had toward selling is evaporating as the housing market rebalances.”
Curious enough, if you watched the housing market predictions video I posted earlier this year, I shared a list of “buzz words” we’ll hear this year. “Rebalance” and “balanced” were on the list, among several others. So check it out sometime. It just might fascinate you.
So let’s see how they define a “balanced” housing market.
They say, “in a nutshell, “balance means that the raging seller’s market that’s dominated since the COVID-19 pandemic is slowly shifting – not into a full buyer’s market territory, but toward a middle ground that puts buyers and sellers on more even footing.”
So, in your words, how would you describe the current housing market?
One thing is for sure, people will always be people doing what people do. Buying and selling homes when the time is right for them in their life for the reasons important to them is part of what people do. People will make their move whether the real estate market is up, down, or all around.
When will you make your move?
Thank you so much for reading this post! I'm sending you positive vibes everything goes your way! - Andrew Finney
Disclaimer: At the time of writing, Andrew Finney, S.0173260, is a real estate salesperson with King Realty Group (KRG) in Las Vegas, NV. Andrew's videos and blog posts are his own and do not necessarily represent the views and/ or opinions of KRG.