{"id":145555,"date":"2022-11-14T09:10:43","date_gmt":"2022-11-14T16:10:43","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=145555"},"modified":"2023-08-09T10:19:07","modified_gmt":"2023-08-09T16:19:07","slug":"housing-markets-that-will-be-the-most-resilient","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/housing-markets-that-will-be-the-most-resilient","title":{"rendered":"These Housing Markets Will Be The Most Resilient During The Correction"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm?e=BIGPOC3394108057&#038;light=false\" width=\"100%\"><\/iframe>  \n\n\n\n\n<p><span data-preserver-spaces=\"true\">With mortgage rates topping 7% and home prices remaining elevated, Americans are less confident than they\u2019ve ever been about their home-buying prospects. According to&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.fanniemae.com\/research-and-insights\/surveys-indices\/national-housing-survey\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Fannie Mae<\/span><\/a><span data-preserver-spaces=\"true\">, only 16% of consumers believe it\u2019s a good time to buy.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">While affordability remains a barrier, there\u2019s another reason to be concerned\u2014nationwide home prices are likely to depreciate from their current values. This could leave new homeowners trapped in high-interest mortgages as their home equity declines. Home prices have already fallen&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/fred.stlouisfed.org\/series\/CSUSHPISA\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">1.3% since June<\/span><\/a><span data-preserver-spaces=\"true\">, the first decline in a decade. The total number of applications for mortgages is&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.yahoo.com\/video\/moody-home-prices-crash-20-142931780.html\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">fewer<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;now than during the Great Recession. While most analysts don\u2019t expect a devastating crash akin to 2008, it\u2019s likely to be the second largest hit to home values of the post-World War II period. But some experts are more optimistic than others.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">How Far Will Housing Prices Fall?<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Researchers at&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.goldmansachs.com\/insights\/pages\/why-home-prices-are-poised-to-fall.html\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Goldman Sachs<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;predict home prices will fall 5-10% from their peak in the U.S., which wouldn\u2019t offset the rise in home prices through the pandemic. Many homeowners made strong equity gains and socked away extra cash during lockdowns, setting them up to weather a downturn. A recession can force people to sell, but most homeowners have fixed-rate mortgages and may choose to rent their homes instead. That would maintain the relative shortage of supply, which could keep prices from falling too rapidly.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Researchers at&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/wellsfargo.bluematrix.com\/links2\/html\/429eb828-b17e-4e47-8856-4ff59f9d3d1a\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Wells Fargo<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;predict a 5.5% decline in home prices in 2023. But they note that several factors could cause a greater or lesser decline.&nbsp;<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">Younger buyers are driving strong demand, but they\u2019re also the group more likely to become unemployed during a recession and to feel the pain of higher mortgage rates.&nbsp;<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Most homeowners have mortgage rates under 5% and recognize it\u2019s not a good time to sell, which could keep supply limited, unless unemployment forces them out of homeownership.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Building materials are becoming cheaper and more abundant, but builders may still put new construction projects on hold if home sales continue to drop.<\/span><\/li>\n<\/ul>\n\n\n\n<p><span data-preserver-spaces=\"true\">Moody\u2019s Analytics thinks the fall will be more drastic. Researchers are predicting a&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/fortune.com\/2022\/11\/07\/housing-market-to-see-second-biggest-correction-crash\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">10% decline<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;in home prices but estimate a drop of up to 20% in the event of a recession. Falling prices will vary by region\u2014Moody\u2019s estimate is a nationwide average. But with so many overvalued housing markets, researchers think this will be a necessary correction to restore affordability.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">When Will Prices Hit the Bottom?<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">It may take a while for housing prices to bottom out and begin to reverse. Moody\u2019s analysts predict that it won\u2019t happen until late 2025. Wells Fargo researchers report that home prices will begin to rebound in 2024. And analysts at Goldman Sachs pinpoint March of 2024 as the time home values will hit bottom.&nbsp;<\/span><\/p>\n\n\n\n<figure class=\"wp-block-table is-style-stripes\"><table><tbody><tr><td>&nbsp;<\/td><td><b>Predicted decline&nbsp;<\/b><\/td><td><b>Predicted price bottom<\/b><\/td><\/tr><tr><td><b>Goldman Sachs<\/b><\/td><td><span style=\"font-weight: 400;\">5-10%<\/span><\/td><td><span style=\"font-weight: 400;\">March, 2024<\/span><\/td><\/tr><tr><td><b>Wells Fargo<\/b><\/td><td><span style=\"font-weight: 400;\">5.5%<\/span><\/td><td><span style=\"font-weight: 400;\">Early 2024<\/span><\/td><\/tr><tr><td><b>Moody\u2019s Analytics<\/b><\/td><td><span style=\"font-weight: 400;\">10-20%<\/span><\/td><td><span style=\"font-weight: 400;\">Late 2025<\/span><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Which Markets Will Tumble the Most, and Which Are the Most Resilient?&nbsp;<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Predictions from&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.yahoo.com\/video\/moody-home-prices-crash-20-142931780.html\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Moody\u2019s Analytics<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;and&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.redfin.com\/news\/metros-recession-risk-housing-downturn-2022\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Redfin<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;show the steepest declines in markets that saw the greatest increases in home prices over the past two years. In other words, the most overvalued markets will experience the sharpest corrections. For example, Redfin expects Boise, Riverside, Phoenix, and Tampa to be among the markets with the greatest risk of a downturn. Moody\u2019s predicts that house prices will fall more than 10% in 196 markets. Researchers believe prices in Morristown, Tennessee, will decline -26%. Other markets that will drop sharply include Muskegon, Michigan, and Flagstaff, Arizona.<\/span><\/p>\n\n\n<div class=\"tableauPlaceholder\" id=\"viz1668441684192\" style=\"position: relative\"><noscript><a href=\"https:\/\/www.redfin.com\/\" target=\"_blank\" rel=\"noopener\"><img decoding=\"async\" alt=\" \" src=\"https:\/\/public.tableau.com\/static\/images\/Re\/Recession_Risk_Map_packaged\/Dashboard1\/1_rss.png\" style=\"border: none\" title=\"\"><\/a><\/noscript><object class=\"tableauViz\" style=\"display:none;\"><param name=\"host_url\" value=\"https%3A%2F%2Fpublic.tableau.com%2F\"\/><param name=\"embed_code_version\" value=\"3\"\/><param name=\"site_root\" value=\"\"\/><param name=\"name\" value=\"Recession_Risk_Map_packaged\/Dashboard1\"\/><param name=\"tabs\" value=\"no\"\/><param name=\"toolbar\" value=\"yes\"\/><param name=\"static_image\" value=\"https:\/\/public.tableau.com\/static\/images\/Re\/Recession_Risk_Map_packaged\/Dashboard1\/1.png\"\/><param name=\"animate_transition\" value=\"yes\"\/><param name=\"display_static_image\" value=\"yes\"\/><param name=\"display_spinner\" value=\"yes\"\/><param name=\"display_overlay\" value=\"yes\"\/><param name=\"display_count\" value=\"yes\"\/><param name=\"language\" value=\"en-US\"\/><\/object><\/div>\n<p>                <script type=\"text\/javascript\">                    var divElement = document.getElementById('viz1668441684192');                    var vizElement = divElement.getElementsByTagName('object')[0];                    if ( divElement.offsetWidth > 800 ) { vizElement.style.width='100%';vizElement.style.height=(divElement.offsetWidth*0.75)+'px';} else if ( divElement.offsetWidth > 500 ) { vizElement.style.width='100%';vizElement.style.height=(divElement.offsetWidth*0.75)+'px';} else { vizElement.style.width='100%';vizElement.style.height='727px';}                     var scriptElement = document.createElement('script');                    scriptElement.src = 'https:\/\/public.tableau.com\/javascripts\/api\/viz_v1.js';                    vizElement.parentNode.insertBefore(scriptElement, vizElement);<\/script><\/p>\n\n\n\n<p><em>Above is <a href=\"https:\/\/www.redfin.com\/\" target=\"_blank\" rel=\"noreferrer noopener\">Redfin\u2019s<\/a> analysis of housing markets in the 98 U.S. metros where sufficient data was available and uses several housing-related indicators for each metro, including home-price volatility, average debt-to-income ratio, and home-price growth. Each metro is assigned an overall risk score, relative to the other metros in the analysis: 100 represents the highest likelihood of a housing market downturn, including year-over-year home-price declines, while 0 represents the lowest likelihood. Click <a href=\"https:\/\/www.redfin.com\/news\/metros-recession-risk-housing-downturn-2022\/\" target=\"_blank\" rel=\"noopener\">here<\/a> for the full methodology.<\/em><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Conversely, markets that have remained affordable since 2020, including many Rust Belt metro areas, will be the most resistant to falling prices. Redfin cited Cleveland, Ohio, and Buffalo, New York, as two markets with the lowest risk of a downturn. Moody\u2019s forecasts the smallest decline in Montgomery, Alabama, at only -1.4% Other resilient markets include Erie, Pennsylvania, and Trenton-Princeton, New Jersey.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">This is consistent with research on housing market trends that suggests prices follow the principle of&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.researchgate.net\/publication\/223592509_Housing_market_dynamics_Evidence_of_mean_reversion_and_downward_rigidity\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">mean reversion<\/span><\/a><span data-preserver-spaces=\"true\">. When housing prices in a market deviate from their fundamental value, they eventually return to that fundamental value. In volatile markets (e.g. Phoenix and Tampa), the price cycles are typically larger than in tame markets (e.g. Chicago and Cleveland). But in more volatile markets, increases in housing prices during appreciation periods are more pronounced than decreases in housing prices during a downturn.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">What does this mean for investors? When housing prices are rising, investors will realize greater appreciation in volatile markets. But they\u2019ll also be at risk of seeing steeper declines in home values when a downturn hits. The longer a market has been overvalued, the more likely it will revert to the mean in the near future.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">But even when prices in these markets fall below their fundamental value, the decreases are somewhat smaller than the increases. Over time, holding a property in a volatile market through the ups and downs may prove to be more profitable, assuming you bought when prices were low. On the other hand, short-term investments, like fix-and-flip deals, may be riskier in these markets.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Is Now a Good Time to Invest in Real Estate?<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Investors should proceed with caution over the next year, especially in highly overvalued markets. Rent-to-price ratios are high in some of the more tame markets like Cleveland and Chicago, and sellers across the country will be more willing to negotiate prices as competition wanes. If you can get a price reduction on a property that will yield strong positive cash flow and hold the investment through the anticipated price declines, then you\u2019ve got yourself a deal.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">But you should be conservative with your rental income estimates, as&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.mortgagenewsdaily.com\/news\/10142022-apartment-rents\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">rent growth is slowing<\/span><\/a><span data-preserver-spaces=\"true\">, and expect home prices to fall before they rebound. Looking at historical changes in home prices for the market you\u2019re interested in may help you determine where prices will land when they\u2019re at the bottom.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Be poised to pounce\u2014sometime between early 2024 and late 2025, analysts expect prices to hit bottom, and the Mortgage Bankers Association expects mortgage rates to come down to&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.cnn.com\/2022\/10\/24\/homes\/mortgage-rate-forecast-2023\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">around 5.4%<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;by next year\u2019s end. Bolster your cash savings now so you can take advantage of the best deals when they arise.&nbsp;<\/span><\/p>\n\n\n\n    \n  <div id=\"visibility-group-block_0ee79bbe1e1fdaef1c50392b7f51c152\" class=\"visibility-group alignwide  hidden\">\n        \n\n<div id=\"hero-block_db86ad2fae62d48987564949d1411e82\" class=\"first:mt-0 hero-block py-4  alignwide   has-background has-slate-200-background-color has-text-color has-theme-gold-color\">\n    <div\n        class=\"gap-10 lg:gap-20 flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 lg:w-1\/2 \">\n            <main class=\"py-4\">\n                \n\n<p class=\"has-slate-800-color has-text-color has-large-font-size\" style=\"font-style:normal;font-weight:800\">Find the Right Agent, Close the Best Deal<\/p>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-slate-900-color has-text-color\" style=\"font-size:18px\">Step #1: Use Agent Finder to match with top <em><strong>investor-friendly<\/strong><\/em> real estate agents to help you find, analyze, and close your next deal.<\/p>\n\n\n\n<div id=button-custom-event-block_18f374f1356e75eb600f16260562750b class='button-custom-event'>\n      <a href=\"https:\/\/www.biggerpockets.com\/agent\/match\" x-on:click=\"window.analytics.track(&#039;Blog Block | B2C Marketplace Agent Finder&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/housing-markets-that-will-be-the-most-resilient&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\">Find an Agent<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n                <div class=\"lg:w-1\/2 first:mt-0 relative h-full lg:flex lg:items-center\">\n            <img decoding=\"async\" class=\"object-cover w-full relative z-20 my-0  rounded-md hidden lg:block\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2021\/08\/Marketplace-Blog-Blocks-Agent-v3.png\" alt=\"investor friendly real estate agent\" title=\"\">\n        <\/div>\n            <\/div>\n<\/div>\n\n  <\/div>\n  \n\n\n<div class=\"wp-block-group\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n    \n  <div id=\"visibility-group-block_64dd31c79f00f\" class=\"visibility-group  \">\n        \n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div id=\"hero-block_64dd2875dba9d\" class=\"first:mt-0 hero-block py-4    has-background has-slate-100-background-color has-text-color has-theme-slate-color\">\n    <div\n        class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 w-full \">\n            <main class=\"py-4\">\n                \n\n<h3 class=\"wp-block-heading my-0 tracking-tight font-extrabold has-theme-slate-dark-color has-text-color has-large-font-size\">Join the community<\/h3>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-theme-slate-color has-text-color\" style=\"font-size:16px;font-style:normal;font-weight:400\">Ready to succeed in real estate investing? Create a free BiggerPockets account to learn about investment strategies; ask questions and get answers from our community of +2 million members; connect with investor-friendly agents; and so much more. <\/p>\n\n\n\n<div id=button-custom-event-block_64dd2888dba9e class='button-custom-event'>\n      <a href=\"https:\/\/www.biggerpockets.com\/signup\" x-on:click=\"window.analytics.track(&#039;Blog Block | Acquisition | Free Membership Signup&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/housing-markets-that-will-be-the-most-resilient&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\">Sign Up<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n            <\/div>\n<\/div>\n\n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n  <\/div>\n  <\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p>With mortgage rates topping 7% and home prices remaining elevated, Americans are less confident than they\u2019ve ever been about their home-buying prospects. According to&nbsp;Fannie Mae, only 16% of consumers believe [&hellip;]<\/p>\n","protected":false},"author":613615,"featured_media":145556,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7119,8],"tags":[],"class_list":["post-145555","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-biggerpockets-daily","category-real-estate-trends"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/145555","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/613615"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=145555"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/145555\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/145556"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=145555"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=145555"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=145555"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}