The real estate market is potentially facing a downward shift in house prices, offering a respite for buyers while posing challenges for sellers. This news comes as experts, including Mark Zandi, the chief economist at Moody’s, and Glenn Kelman, CEO of Redfin, share their insights on the current state of the housing market.
Zandi, in an interview with Yahoo Finance, outlined the conditions for a market recovery. He stated, “The only way out of the box, the only way to get sales back up is mortgage rates have to come down, incomes have to continue to improve, we have to avoid a recession, and I suspect we’ll have to see some house price declines at some point here.” This suggests that a decrease in mortgage rates and an improvement in incomes are necessary for the housing market to bounce back.
Kelman also expressed a similar viewpoint in his interview with Fox News, agreeing with Morgan Stanley’s prediction of a 3% decline in home prices next year. He stated, “A decline seems not just possible, but likely.” This indicates that there is a consensus among experts that a decline in house prices is on the horizon.
The slowdown in housing activity this year can be attributed to the Federal Reserve’s measures to combat inflation, which led to soaring mortgage rates. Homeowners enjoying lower rates have been reluctant to sell, while high rates have priced out many potential buyers who are waiting for more favorable conditions.
Recent data has shown a dramatic drop in home sales, reaching levels not seen in over a decade. Zandi highlighted that the annualized sales of pre-owned homes dropped below 3.8 million units in October, the lowest figure in 13 years. This further emphasizes the severity of the current market situation.
Despite the challenges, Kelman observed some positive signs, such as an increase in housing inventory and adjustments in pricing. He stated, “The market has just been frozen because buyers and sellers can’t agree on a price. For the first time, there’s a break in the logjam where we might see a real drop in prices, and that is going to spur sales.” This suggests that a decline in prices could potentially stimulate the housing market.
For investors interested in gaining exposure to the real estate sector without direct property ownership, ETFs such as the iShares U.S. Real Estate ETF and the Vanguard Real Estate ETF offer viable options. Additionally, stocks like Zillow Group, Inc (Z) and Redfin Corporation (RDFN) are closely tied to housing market trends.
In comparison, companies like Anywhere Real Estate Inc. (HOUS) and RE/MAX Holdings, Inc. (RMAX) have leveraged their vast networks and established brand names to maintain a significant market share.
While the future of the real estate market remains uncertain, it is clear that there are challenges ahead for sellers and opportunities for buyers. It will be interesting to see how the market evolves in the coming years and whether the predicted decline in house prices will materialize.
