Source: The Hill —
The U.S. housing market could be heading toward a correction after more than two years of massive price growth that has more recently been offset by the Federal Reserve’s attempt to curb inflation by raising interest rates.
The central bank’s effort has led to a sharp rise in mortgage rates, a decline in the number of homes under contract and a record monthly price growth slowdown in September of 2.6 percent.
A correction would allow buyers to spend more time on the market and possibly have less competition for homes, but experts say the recent price drops may not be enough to offset high mortgage rates combined with historic price increases during the pandemic.
National housing market corrections are rare, economists told The Hill. Though there is no set definition, the experts said the market is in a correction when changing conditions cause home prices to drop.
“We are seeing that now as home values at the national level have fallen a bit from their June peak, part of a rebalancing of the housing market as prospective buyers are pulling back because of soaring costs and sellers are reacting by lowering their list price or accepting a lower offer on their home,” Zillow senior economist Jeff Tucker told The Hill in an email.
“But home values are nowhere near a 10% decline from peak levels nationally,” Tucker said, noting that a correction in the stock market refers to a decline of 10 percent or more from peak levels.
Average home prices fell by 0.4 percent in September to $358,283 from their June peak at $359,719, according to Zillow data.
Yelena Maleyev, an economist with KPMG Economics, told The Hill in an email that the recent price declines can be viewed in the context of the unusually fast price growth over the last two years.
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