US: Home Prices will Rebound after a projected Drop of $1 trillion this year

The housing market in the United States could witness a temporary loss of nearly $1 trillion in value this year.

The housing market in the United States could witness a temporary loss of nearly $1 trillion in value this year due to a predicted 2% decline in home prices, according to housing analytics firm Pulsenomics.

However, the economists expect the market to rebound over the next three years, with home prices projected to increase by 4% annually. This optimistic forecast implies that total home values could reach $60.9 trillion by the end of 2027. However, half of the forecasters see downside risk to price growth estimates, while only 16% think there could be a bullish surprise.

U.S. Home Prices will Rebound after a projected Drop of $1 trillion this year

As per Pulsenomics' survey of experts, every major US metropolitan area is expected to witness home prices drop since 2022 except for Miami. Cities in the Southeast are anticipated to experience the most significant declines in 2023, while several Western cities will witness the least decline. This projection is based on limited supply and a significant slowdown in the growth rate of new inventory. The affordability of housing in America is falling at its fastest pace in decades, with mortgage rates remaining above 6% and house prices reaching historic highs. As a result, many potential buyers are withdrawing from the market.

Despite the temporary losses, analysts remain optimistic that the housing market will eventually recover. In 2024, the market is expected to witness a 1.2% increase, and the real estate recovery will accelerate over the next three years, when house prices are forecasted to increase 4% per year. Terry Loebs, the founder of Pulsenomics, explained the team's positive five-year forecast while acknowledging the downside risk. He said that despite variations, most of the panelists considered this risk balanced.

The anticipated temporary loss of nearly $1 trillion in value in the US housing market this year may cause panic among potential buyers and investors, but experts are optimistic about the market's eventual rebound. Although the forecast foresees a brief slump, the predicted long-term growth and overall value of the housing market are quite reassuring.