- Home prices are still increasing despite a cooling housing market.
- But price declines lie ahead, many experts argue.
- Insider recently spoke with three experts calling for median home prices to fall.
The housing market is starting to cool off in a big way thanks to skyrocketing mortgage rates this year.
Homebuilder sentiment is at its second-lowest level in 37 years thanks to tanking demand — existing home sales were down 14% in June, year-over-year.
Still, home prices have yet to take a hit. The median price of homes sold in the US hit an all-time high of $440,300 in the second quarter.
But price declines are coming, according to a growing chorus of economists and industry experts.
Recently, Insider profiled the views of three experts calling for median home price drops ahead.
Michael Cook, an investment analyst at Penn Mutual Asset Management, told Insider that he thinks prices trend back toward their levels before the pandemic began, especially in some of the hottest markets in the county.
“The US housing market is due for a reset, given the extraordinary home price growth seen since the onset of the pandemic,” Cook said.
José Torres, a senior economist at Interactive Brokers, said he thinks supply and demand dynamics in the market are moving in such a way that creates a perfect recipe for home price declines.
“A perfect storm is brewing in the real estate market due to near decade high construction levels and plummeting demand,” Torres said.
Desmond Lachman, senior fellow at the American Enterprise Institute and a former deputy director at the International Monetary Fund, broke down for Insider why prices will drop 15-20% as buyer demand gets crushed by rising interest rates and a still-hawkish Fed.
“They’re going to keep monetary policy tight, even if inflation peaks,” Lachman said.