Releasing the second-quarter results of its VeroFORECAST, Veros Real Estate Solutions, an enterprise risk management and collateral valuation service company, predicts that home prices will appreciate on average 4.5% over the next 12 months.
This forecasted number, while still showing signs of strong growth, is down by half from Veros’ 7.1% appreciation rate predicted in the same survey covering the first quarter. The driving force behind this downward revision is primarily due to higher mortgage interest rates and slowing demand as some buyers are beginning to hesitate due to recession fears.
Amid all of this, inventory remains low which ultimately prevents prices from slowing even further. A 4.5% average annual appreciation forecast signifies “that the process has begun to return the market to historically more normal times from the overheated post-pandemic market of the previous two years.”
“Now that the Fed has finally gotten serious with fighting inflation, interest rates have moved up significantly and that is causing demand in some markets to slow significantly,” said Eric Fox, Chief Economist for Veros. “To be clear, some markets are still quite strong with limited inventory and a large percentage of active listings which are pending. But we are finally starting to see the first signs of some major markets which we are forecasting to depreciate during the next 12 months—most notably Chicago and New York.”
Karen Picarello, a Certified Real Estate with RE/MAX Fine Properties in Scottsdale, AZ, is also seeing signs of a slowing, yet healthy, market.
“With higher interest rates, some buyers are no longer looking, which is lessening overall buyer demand. Buyers with significant cash or equity are being more selective and no longer making offers on houses that are priced significantly above the last comparable sold price,” said Picarello. “Fear of a recession and crashes in both the real estate and stock markets are also impacting the buyers’ willingness to purchase at this point. Still, houses priced ‘at market’ in good condition are seeing robust activity with healthy offers and minimal days on market. So the market is actually in the process of returning to a more normal, healthy market.”
The top 10 of 313 top-performing markets across the country set to be the strongest performing are now only predicted to appreciate at a rate of 7% to 8% overall, down by half from last quarter's predictions. The top 10 markets that are expected to perform the strongest are:
The bottom 10 cities that are predicted to post the least price appreciation are: