Once historically low mortgage rates disappeared this spring, prospective buyers began to feel the full weight of record home price appreciation. Neighborhoodscout's last quarterly appreciation rate in Texas was 7.53 percent, which is equivalent to an annual appreciation rate of 33.67 percent. People from all over the country are flocking to Texas to live, work and invest in the Texas housing market. If a recession occurs, Moody's Analytics predicts that significantly overvalued housing markets are likely to see home prices fall by 15 to 20% over the next two years.
While home sales have slowed in Texas, this isn't always an indication of demand but rather of supply. Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a report last week that the fall in demand for housing amid the sharp rise in mortgage rates is seriously affecting house prices. Whether you're a homebuyer or a real estate investor, Texas has been one of the best long-term real estate investments in the United States over the past decade. To find out which housing markets are ready for home prices to fall, Fortune contacted Moody's Analytics for access to its latest analysis on exclusive housing.
As mortgage rates rise, home sales and, in some areas, home prices are slowing down and uncertainty increases across the market, many homeowners, prospective sellers and prospective buyers are nervous about the arrival of next year. The cities that experienced the most pronounced peaks in home prices last year are now returning to Earth, including cities such as Austin, Texas; Phoenix, Arizona; Salt Lake City, Utah; and Denver, Colorado. House prices are falling, but they are still much higher than they were a year ago, rising 13.2 percent year-on-year (year-on-year). Goldman Sachs economists said they expect home prices to fall 5% to 10% more modestly next year.
Over the past decade, home prices in Texas increased 99.56 percent, equivalent to an annual home appreciation rate of 7.15 percent, according to data compiled by NeighborhoodScout. The supply of homes available for sale is likely to shrink next year, Shepherdson predicted, while noting that prices need to fall substantially to restore balance. The average number of days in the market (DOM) in Texas remained low at 34 days, indicating a continuing imbalance in trading power. As we approach 2023 and beyond, it's important for homeowners and potential buyers alike to understand what's happening with home prices in Texas and across the country.
With mortgage rates on the rise and a potential recession looming on the horizon, it's important to be aware of how these factors could affect home prices. While it's impossible to predict exactly what will happen with home prices, it's likely that they will continue to fluctuate as economic conditions change. It's important for homeowners and potential buyers alike to stay informed about current market conditions so they can make informed decisions about their investments.