U.S. Housing Market Faces Potential Price Correction 'Worse Than 2008'

Housing analyst Melody Wright has issued a stark warning: the U.S. housing market may experience a price correction more severe than the 2008 financial crisis.

 

Wright anticipates that home prices could plummet by 50% as early as next year.

 

She suggests that prices will adjust to align with median household incomes, leading to a significant downturn.

 

In a recent interview, Wright emphasized the rapid pace of this potential decline, stating, "This could devolve a lot faster than last time."

 

Current market trends support her concerns.

 

Rising inventory coupled with dwindling demand has led to price reductions in several U.S. metropolitan areas, particularly in the Sunbelt and Southern regions that saw rapid growth between 2020 and 2022.

 

Nationally, the once-accelerated price growth has decelerated, with the median sale price in October showing only a 1.2% increase from the previous year, reaching $439,701.

 

Data from Zillow indicates that 53% of U.S. homes have lost value over the past year, marking the most significant decline since 2012.

 

While affordability has seen slight improvements, many Americans remain sidelined due to elevated home prices, property taxes, insurance premiums, and borrowing costs.

 

Wright points out that while national home prices may not have fallen significantly this year, a clear deceleration is evident.

 

She notes that the market is ending the year with "flat" home price growth.

 

Looking ahead, Wright warns of steeper declines.

 

She predicts that by 2026, home prices might correct to levels matching median household incomes.

 

Given the 2024 median household income of $83,730, this projection suggests a potential price decline of nearly 50%, with even more significant drops in certain areas.

 

Wright also expresses concern about the quality of homes that investors may abandon.

 

She highlights that many all-cash buyers from the last cycle might neglect properties, leading to issues like unkempt lawns and unresolved maintenance problems.

 

Such neglect could accelerate market deterioration faster than in previous downturns.

 

As the housing market faces these challenges, stakeholders are closely monitoring developments to navigate the potential turbulence ahead.