US home prices will likely have to decline by as much as 20% over the course of a multi-year correction
The most recent correction cycles that occurred in the US housing market, such as a bubble in the 1990s
and the sector’s implosion in the mid-2000s, took several years to conclude, DataTrek Research co-founder Nicholas Colas said.
In the current market, US home prices have only begun to fall in the last few months
suggesting the declines will continue for the foreseeable future.
US home prices surged to their highest level on record during a period of loose financial policy and low interest rates in response to the COVID-19 pandemic
But prices began a rapid descent this year as the Federal Reserve implemented interest rate hikes to cool inflation and slow the economy.
Mortgage rates have more than doubled this year, briefly topping 7% in October for the first time in 20 years
As of Thursday, a 30-year fixed-rate mortgage averaged 6.49%, according to Freddie Mac.
Increased rates have crushed home affordability for prospective buyers and forced sellers to slash their listing prices to jumpstart interest.