Top investment firms, including Morgan Stanley, are predicting a significant drop in U.S. home prices amid high mortgage rates, elevated home prices, and affordability challenges.
Morgan Stanley is calculating home prices to dip by 7 percent by the end of 2023, which is more than twice as large as the 3.1 percent peak-to-trough decline seen during the early 1990s. If the prediction were to become true, it would be the second-largest drop since the Great Depression. The top spot is taken by the 27 percent peak-to-trough decline seen between 2006 and 2021.
Morgan Stanley blamed unprecedented home price growth and spiking mortgage rates for the situation. “Affordability is already challenged, exposing would-be homeowners to an increasing rent environment that erodes their ability to save for a downpayment,” the firm’s researchers wrote in a note, according to Fortune….