quote:
Not only is there a building consensus on Wall Street that we’ve entered into a period of falling home prices, but there’s also a consensus it will be the second-sharpest home price decline since the Great Depression.

U.S. home prices declined month-over-month last week for the first time since 2012, according to the Case-Shiller U.S. National Home Price Index.

So far, it doesn’t involve all U.S. markets. But more markets are also expected to fall.

“Corrections in home prices can be expected in 2023 as long as interest rates remain elevated and consumer demand remains slow,” said Zonda’s chief economist @AliWolfEcon

By the end of 2023, U.S. home prices could fall to 7%, predicts Morgan Stanley.

That’s far smaller than the 27% peak-to-trough decline between 2006 and 2012 but larger than the 3.1% peak-to-trough decline in the early ‘90s.

) But the 7% is only Morgan Stanley’s “base case” forecast for home prices.

the “bull case” is a 5% climb in 2023
the “bear case” could exceed a 10% decline in 2023

Other U.S. home price forecasts for 2023:

Goldman Sachs: fall 5% to 10%
Moody’s Analytics: fall 5% to 10%
Fitch Ratings: fall 10% to 15%

The most vulnerable home markets are those where:

prices rose sharply because of hybrid work (Boise, Las Vegas, & Denver)
home prices and incomes are out of whack (Nashville, parts of Florida)
housing inventory has risen rapidly (Phoenix, Austin)

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Where are all the guys that said there wont be mass foreclosures because people have built up tons of equity?

How about all of the guys on here saying the RE market won't crash because there's still an inventory shortage?

Unless you sold last year or earlier this year your hopes for a quick sale to stave off foreclosure is dead and your equity is going to continue to decline. Also, inventory shortages don't mean anything if people can't afford to buy. Pre-runaway inflation housing prices were already far outpacing wage growth and had been that way for the past decade but some of you hang your hate on "low inventory levels" being the saving grace.

BTW, there are still 400K people in forbearance from Covid and the prediction is that the majority won't be able to make it out of forbearance. So with a soft market, those people will go into foreclosure unless the current regime prints more money to bail them out. By comparison, the peak of the housing crash from 2007-08 was in 2010 when over 1 million homes went into foreclosure so we aren't going to be terribly far off.

The early signs of things getting worse are there:

quote:
“Early-stage delinquencies are showing a small but clear increasing trend on a month-over-month and year-over-year basis,” said Molly Boesel, Principal Economist at CoreLogic. “While the share of mortgages that are 30 to 89 days past due remains below the pre-pandemic level, the slight increase is occurring in most areas of the country and could indicate that more borrowers are having trouble making their monthly payments.”

Although overall U.S. mortgage delinquencies crept up again in July from earlier in 2022, they declined for the 16th straight month year-over-year and remained near historic lows. The national foreclosure rate has held steady at 0.3% since March, but rose by 0.1-percentage point from July 2021. This slight bump mirrors metro-level trends, with almost two-thirds of areas that CoreLogic tracks posting small annual foreclosure gains. The minor uptick in foreclosures may be due to mortgage forbearance periods and moratoriums ending for some homeowners, while the increase in delinquencies could indicate that inflation is negatively impacting others’ abilities to make monthly payments.

Early-stage delinquencies, those 30 to 59 days past due, stood at 1.3%, up from 1.1% in July 2021. Those measured as “Adverse Delinquency,” or 60 to 89 days past due, measured 0.4%, up from 0.3% in July 2021.

Mortgage loans deemed in “Serious Delinquency,” 90 days or more past due, including loans in foreclosure, stood at 1.3%, down from 2.8% in July 2021, and a high of 4.3% in August 2020.

The Foreclosure Inventory Rate, representing the share of mortgages in some stage of the foreclosure process, was at 0.3% in July 2022, up from 0.2% in July 2021, while the Transition Rate, measured as the share of mortgages that transitioned from current to 30 days past due, stood at 0.7%, up from 0.6% year-over-year in July 2021.

LINK

The year-over-year comparison is unfair considering the shutdowns and mass forbearance programs. Even comparing current data to 2019 is unfair because of the 2-year interruption we had. The real concern is looking at the month-to-month data and it is showing an upward trend.

This is going to be a crash in some of the hot markets and will be a hard landing for the entire USA RE market. There is no way for the Fed at this point to steer it to a soft landing and they said as much the last time they rose rates.