Home prices are in their longest slump since 2012. Here's what experts think happens next.

·3 min read
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  • US home prices just fell for the seventh consecutive month, Case-Shiller data showed Tuesday.

  • Some experts anticipate home prices to remain elevated, while others see steep declines.

  • Here's what economists are saying about the housing market outlook.

Home prices in the US are in their longest slump in over a decade, with Case-Shiller data showing Tuesday that prices just fell for the seventh consecutive month.

The S&P CoreLogic Case-Shiller National Home Price Index, which is a gauge of homes across the country, slipped 0.2% in January, compared with December on a seasonally-adjusted basis. That's the seventh consecutive monthly drop, representing the longest slump since 2012.

Year-over-year, the index climbed 3.8% in January, slower than the prior month's 5.6% rate and the smallest annual gain since 2019.

Over the last year, the Federal Reserve's aggressive interest rate hiking campaign has helped lift mortgage rates sharply, weighing on affordability and demand. The average 30-year fixed rate was 6.42% last week, up from 4.42% a year earlier, Freddie Mac said.

Here's what experts have said could come next for the housing market.

Zillow

Reacting to Tuesday's Case-Shiller reading, Zillow senior economist Jeff Tucker said other data in January showed time on market began to accelerate and pending home sales partially rebounded from November lows.

"As the market comes back to life this spring, prices are likely to rise month over month, but fall year-over-year, compared to last year's frenzied spring shopping season when buyers raced to lock in lower mortgage rates. Just how much prices will rise from winter lows will depend on whether mortgage rates stabilize and creep downward or stay high and volatile," he wrote in a note.

Bright MLS

"Home price growth will likely continue to moderate this spring and there may be modest year-over-year price declines in other cities. Barring a major recession, however, it is likely that the combination of low inventory and sufficient levels of demand will keep home prices from coming down significantly in most local markets. A significant recession with serious labor market impacts—which is not likely—is one way in which competition in the housing market could slow and prices could fall," the firm's chief economist Lisa Sturtevant said in a note Tuesday.

Beazer Homes

Allan Merrill, the chief executive of the homebuilding company, said the US is facing a serious housing supply shortage. Combined with constraints in the labor market, and relief seems years away.

"Long-term [the housing shortage] puts a floor under demand in this country for newly built homes," he told CNBC on Thursday. "We just have this structural deficit. I don't see the mechanisms in place that are likely to close that shortage any time soon."

National Association of Realtors

In an interview with Insider earlier this month, Nadia Evangelou, senior economist and director of research at the NAR, said the collapse of Silicon Valley Bank and the ensuing turmoil in the financial sector could spark more activity in the housing market.

It's possible, she explained, that mortgage rates could now fall faster than anticipated, which would make allow more Americans to explore homebuying as affordability eases.

"We had expected mortgage rates to come down to the lower range of 6% sometime in the second half of 2023, but now we may see that level in the coming weeks," Evangelou said. "The housing sector reacts immediately to changes in mortgage rates. We expect some relief in affordability."

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