Home prices are still rising because there aren’t enough homes for sale and there is buyer demand. And if those conditions continue, most forecasts expect home prices to keep holding up.
But real estate firm CoreLogic uses other metrics to predict the direction of home values, and with those indicators, prices could begin to fall.
“One of them is the unemployment rate. The other thing is housing starts. And the third factor is personal disposable income. Taking all three into consideration, it suggests that prices will decline in the next year,” Selma Hepp, deputy chief economist at CoreLogic told WTOP.
Its forecast sees average prices in the D.C. region falling as much as 5.4% by May 2021, with a nationwide fall of as much as 6.6%.
CoreLogic labels the D.C. area housing market as “overvalued.” But that does not necessarily mean overpriced, since price is just a reflection of market demand.
“Home price growth is faster than real personal disposable income growth, and that is when markets are considered overvalued. So, home prices are rising faster than what people can basically pay for the homes,” Hepp said.
CoreLogic’s forecast for falling prices is more dramatic in some markets than others. It said prices could fall up to 20.1% over the next year in Las Vegas, 11.7% in Boston and 9.0% in Denver.
Despite the forecast for falling prices in the D.C. area and nationally, they are continue to rise for the moment. The median price of a single-family home that sold in the D.C. region in May was up 5.0% from a year ago.
