U.S. home prices are forecast to decline modestly this year and by less than previously thought as demand has declined only slightly despite expectations that interest rates have further to rise, according to property analysts polled by Reuters.
The poll of 29 analysts, conducted between Feb. 15 and March 2, forecast average home prices based on the Case/Shiller index, which rose around 6% last year, were forecast to decline 4.5% in 2023, followed by no increase in 2024. That is slightly less than the 5.6% fall predicted three months ago.
"Buyers are ready to get back into the market. However, volatile mortgage rates, which had dropped in January, encouraging sales activity, will continue to pose affordability challenges, limiting demand," said Crystal Sunbury, senior real estate analyst at RSM, a U.S.-based consulting firm. Indeed, the U.S. outlook was a bit more optimistic than other similar housing markets, like Canada and Australia, which are set to mark bigger falls this year.
"There are growing signs stretched affordability is weighing on home ownership, particularly for those under 35. We expect this to persist in the coming quarters," said Sam Hall, property economist at Capital Economics.
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