There is no way around it: if the Federal Reserve is going to control fugitive inflation, it is going to cause some economic losses along the way.
The central bank has already put a lot of upward pressure on the mortgage rate, which has risen from 3.11% to 5.25% in the last five months as it works to cool the US housing market, one of the biggest drivers of inflation. If policymakers can slow down housing, they will have to reduce their overall inflation.
“Stock prices were much higher than pre-epidemic, home prices were much higher than pre-epidemic … My theory is that all of this leads people to feel more confident and to spend more, and that is pushing us to higher costs, Between high spending and high inflation, “Neil Kashkari, president of the Federal Reserve Bank of Minneapolis, told CNBC earlier this month.
Does this mean the Fed will have to revise home prices on their own?
We are already seeing the US housing market slow down in the face of mortgage rate hikes. Mortgage applications are declining, fewer listings are getting multiple offers, and inventory levels are rising again. However, this is a slowdown অর্থাৎ that is, prices are rising at a more modest rate নয় not a price correction.
Last month, Fate Real estate research firm Koralgic has reached out to see if it will provide an assessment of the country’s largest regional real estate market. Corollage looked at 392 U.S. markets in April and found it 17 regional housing markets Over the next 12 months, local home prices were likely to fall by more than 40%
The U.S. macroeconomic situation has worsened since April. To see if that recession has changed the outlook for the housing market, Fate Korlazic was again asked to conduct an assessment of the regional real estate market. Search? Now 70 regional housing markets Home prices are likely to fall by more than 40% in the next 12 months
But before we delve deeper into the data, let’s take a look at how choreographic has been analyzed.
To determine the likelihood of regional home prices falling, real estate research firms assessed factors such as income growth estimates, unemployment forecasts, consumer confidence, debt-to-income ratios, affordability, mortgage rates, and inventory levels. CoreLogic, which ranks 952 on the Fortune 1000, then ranks the regional real estate market in one of five categories, grouped by the possibility of home prices falling in the next 12 months in that particular market. (Note: Groupings are different this month than the groups used in Corelgic April). Here are the groupings used for the May analysis:
Check out this interactive chart at Fortune.com
Of the 392 regional real estate markets measured by CoreLogic, 144 are in the “very low” risk group. A further 177 housing markets have entered the “lower” group, 44 markets have qualified for the “medium” group and 22 markets have entered the “higher” group.
CoreLogic classifies only four markets where the potential for price reduction is “too high”: Bend, Ore, Prescott, Ariz, Lake Havasu City, Ariz and Bridgeport, Con. (I.e. Fairfield County, Con.).
When Corelzic analyzed the housing market in April, the company found that the average market has a 13% chance of home prices falling in the next 12 months. Now, CoreLogic says the average regional housing market has a 28% chance of falling in the next 12 months. It spikes 15 percentage points in just one month.
Why the big spike last month? CoreLogic indicates an increase in mortgage rates, a decline in consumer confidence, and an additional valuation of the home.
Although CoreLogic finds a home price correction disagreement, it still believes that home prices across the country will be an inch higher next year. Between March 2022 and March 2023, CoreLogic predicted that US home prices would rise another 5.9%.
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This story was originally shown on Fortune.com