Published by Forbes.com | December 30, 2022
Expect falling home prices in 2023. How much will depend on which market.
Home prices go up and down according to supply and demand. Very simple. But because homes aren’t commodities like wheat and corn it’s much harder to predict how much supply and demand there actually is.
I’ve been following home prices for 40 years, but the sharp rise during the pandemic caught me by surprise. None of the usual economic forces were in play.
Typically, home prices rise faster in a local market because of an economic boom that spurs demand; the oil boom in Houston in the 1970s, the financial boom in New York in the 1980s, the tech boom in Seattle in the 1990s, and more recently, the tech surge in San Francisco and the shale-oil boom in Bismarck.
These booms were easy to understand and only affected a few markets. The sub-prime mortgage boom of the mid-2000s was different. A LOT of markets were affected, a lot of private and government actions were involved, and it wasn’t clear exactly WHY home prices were going up so much.
The boom that started in 2021 is again different from anything we’ve seen before. This time ALL local markets in the US are affected; prices rose much faster than they ever have; and the cause was not a surge in demand but a shrinking of supply.
Prices in all local markets are up at least 20 percent and in many markets more than 60 percent. The boom is over now – finally killed by high mortgage rates – but will these higher prices stick?
