Rising mortgage rates have slowed the housing market across the nation and Southern California. Sales are down, inventory is rising and many prospective buyers and sellers have a simple question: Will home prices fall?
According to some analysts, the prospect is growing more likely as the slowdown deepens, with some now adjusting their forecasts to call for price declines next year.
Such predictions mark a shift from earlier this year, when there was greater expert agreement that rising mortgage rates would simply slow price appreciation. That is: Prices would keep climbing but less than they had in the last two years.
Many analysts still see that slower-growth scenario as more likely. Few well-known experts — if any — predict price declines anywhere near what happened during the Great Recession.
But the fact some major forecasters now foresee sustained price declines — something that hasn't happened in more than a decade — underscores just how quickly the housing market is changing.
"It's noteworthy," said Jordan Levine, chief economist at the California Assn. of Realtors. "Prices are going to go down."
Levine said it was just over the last month that he became convinced prices would turn negative.
Two factors helped shift his view. First, he ran the numbers on how much repeated surges in mortgage rates affected purchasing power. Then he saw prospective buyers pull back in real time.
Mortgage rates started the year in the low 3% range but had risen above 4.5% by late March, surpassed 5% in April and surged to nearly 6% this month, according to Freddie Mac's closely observed mortgage survey.
For a $760,000 house, the current median price in Southern California, that means a monthly mortgage payment in early January would've been $3,493, including property tax and insurance, with a 20% down payment, according to a Redfin mortgage calculator.