🎙️ Voice is AI-generated. Inconsistencies may occur.
The U.S. housing market is unlikely to crash next year, economists told Newsweek, despite the sector not being totally out of troubled waters yet and uncertainties surrounding listings, prices and mortgage rates persisting.
After booming for two years during the pandemic, the U.S. housing market has experienced a significant price correction between late summer 2022 and spring 2023. Higher mortgage rates—which this year reached two-decade highs—caused demand to plummet and prices to slide across the country, something that led some to say that the housing market is in a bubble which would eventually burst, triggering a crash.
But Matthew Walsh, Moody's Analytics housing economist, told Newsweek that a crash is not in the cards for next year—mainly because inventory remains critically low across the country.
"Given the tight supply of homes for sale, there is a very low probability of a crash, like the one we saw following the 2000s housing bubble," Walsh said. "Foreclosures, while rising, remain at a historically low level and pose little risk to the outlook for housing in the coming year."
Lawrence Yun, chief economist at the National Association of Realtors (NAR), also believes that a crash is out of the picture. "There are nearly zero forced distressed sales, and homeowners are in fine shape with high housing wealth and low monthly mortgage payments that are locked in and not impacted by inflation," he told Newsweek.
Moody's Analytics expects home prices to continue declining next year, falling by just over 4 percent from December 2023 to December 2024, according to the company's Home Price Index.
"The months ahead will prove challenging for the housing market," Walsh said.
"While the rate on the 30-year fixed-rate mortgage is trending lower, it remains above 7 percent and high rates are pricing out many potential buyers," he continued, adding that despite lingering low inventory in the national housing market, housing prices will fall further.
"Following two years of double-digit price growth, the housing market remains overvalued, and affordability is near a four-decade low," Walsh said.
Redfin, in its latest report, said it expects home prices to fall by 1 percent in the second and third quarter of 2024.
NAR expects home prices to increase by 0.7 percent overall in 2024. Yun said that he expects "little changes in home prices" next year, "though a more likely surprise will be upward movement if mortgage rates fall meaningfully."
According to Walsh, the housing market correction that started in late summer 2022, and which Moody's expects to persist into 2025, is "very different" than the one in 2008—which represented a real crash.
"Homeowners have a lot of equity given the quick pace of appreciation over the last two years, and underwriting remains strong," Walsh said. "With the U.S. economy moderating gracefully, near-term recession odds are fading, mitigating some downside risk to house prices next year."
Moody's and Walsh expect home prices to bottom out in the second half of 2025, though "the regional performance will be mixed, with the once fastest-growing, and most overvalued markets leading the decline in home prices during this time," the economist said.
About the writer
Giulia Carbonaro is a Newsweek reporter based in London, U.K. Her focus is on the U.S. economy, housing market, property ... Read more