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After nine consecutive rate hikes over the past year, the rising interest rate environment has taken a toll on the housing market's momentum, leading to a pessimistic outlook for price home growth in the year ahead. According to the 2023 NY Federal Reserve Bank’s SCE Housing Survey,[1] home price growth expectations for the next year are at the lowest levels since the survey began in 2014.
Americans expect moderate to no growth in home values over the next year, with a surprising number expecting a decrease in pricing. According to the survey, only 55.0% of consumers expect that the average home in their area will increase in value over the next year — the lowest share since the inception of the report and a significant drop-off from the 70.8% observed in 2022. Not only do fewer Americans expect home values to increase, but nearly 20% of respondents believe the values will decrease by over 5%. During the past year, the expectations for home prices declined significantly, especially between May 2022 and November 2022. [2]
According to the survey’s respondents, home prices are expected to grow at the slowest rate in at least the past nine years. Overall, the average expected growth of home prices is a meager 2.6% over the next 12 months. The average expected growth of homeowners, excluding renter expectations, is even lower at only 2.0%. Not only is this an all-time low since the New York Fed began recording this data in 2014, but it is also down substantially from the 7.0% recorded last year.
These data reflect growing pessimism around home values in the short term; however, the expectations for home values over a five-year period are up from last year. This difference reflects an increased concern over home prices now, though a growing optimism of a recovery in the next few years.