By Mike Sunnucks | Rose Law Group Reporter
Higher interest rates will cool housing markets with home prices projected to appreciate a modest 4.5% over the next 12 months.
That is marked change from the significant price gains seen nationally during the coronavirus pandemic.
Some markets including New York and Chicago are expected to see slight declines while Prescott and Flagstaff are projected to be among the top performing U.S. housing markets in the new environment.
That is according to Veros Real Estate Solutions — a risk management firm.
Veros projects higher interest rates and increasing recession fears reducing demand for homes. The Federal Reserve Bank has raised interest rates three times this year and is poised for additional rate hikes to combat 40-year highs in inflation.
“Now that the Fed has finally gotten serious with fighting inflation, interest rates have moved up significantly and that is causing demand in some markets to slow significantly,” said Eric Fox, chief economist at Veros. “To be clear, some markets are still quite strong with limited inventory and a large percentage of active listings which are pending. But we are finally starting to see the first signs of some major markets which we are forecasting to depreciate during the next 12 months – Most notably Chicago and New York.”
Karen Picarello, a Certified Real Estate with RE/MAX Fine Properties in Scottsdale, is also seeing signs of a moderating market.
“With higher interest rates, some buyers are no longer looking, which is lessening overall buyer demand. Buyers with significant cash or equity are being more selective and no longer making offers on houses that are priced significantly above the last comparable sold price,” Picarello said in a release by Veros. “Fear of a recession and crashes in both the real estate and stock markets are also impacting the buyers’ willingness to purchase at this point. Still, houses priced ‘at market’ in good condition are seeing robust activity with healthy offers and minimal days on market. So the market is actually in the process of returning to a more normal, healthy market.”
Veros projects the 10 strongest real estate markets to appreciate 7% to 8% over the next 12 months.
The expected strong markets include Raleigh, North Carolina (with 8.1% projected price growth).
The rest of the top 10 includes Spokane, Washington (8%), Goldsboro, North Carolina (7.7%), Olympia, Washington (7.7%), Prescott and Prescott Valley (7.7%), Vero Beach and the Villages, Florida (7.7%), Richmond, Virginia (7.6%), Flagstaff (7.6%) and Fayetteville, North Carolina (7.6%).
The projected lowest performing housing markets over the next 12 months include Atlantic City (-2.5%), Lake Charles, Louisiana (-2.4%), Midland, Texas (-1.7%), Chicago (-1.1%) and the New York City region (-0.4%).
