Home prices rose by 20.6% year-over-year in March of 2022, marking the largest increase in the 30 years of record-keeping, according to the Joint Center for Housing Studies tabulations of CoStar and CoreLogic Case-Shiller Home Price Indices data.
Rent prices have also skyrocketed, further widening the wealth gap between owners and renters in America, and making homeownership out of reach for nearly four million Americans in the past year. The annual income required to qualify for a median-priced home has increased by $28,000 since last year, according to Harvard researchers.
But things might change soon. With an increased number of potential buyers being closed off from the market, “sellers will eventually see the need to accept a lower price for their property,” said senior property economist Matthew Pointon. Despite mounting pressure on the housing market, the mortgage rate has surged over 6% which could signify that home prices are likely to begin to drop.
Capital Economics predicts a 5% decrease in home prices in 2023, followed by a “gradual recovery” to 3% by 2024. As the housing market slows, real estate firms have begun laying off workers by the hundreds as they anticipate a downturn and decline in home buying.
Still, with ongoing supply chain constraints, inflation, and initiatives by the Fed to keep it under control, home prices are still sky-high. And if the economy dips into a recession, researchers warn that the spike of individuals priced out of ownership would turn “the recent uptick in housing insecurity into a wave.”