Home prices could fall as much as 20 percent next year if the recession deepens. Mark Zandi, chief economist at Moody's Analytics, pointed to housing market forecasts for the coming months, which indicate a market downturn due to overvalued assets in many areas of the country, Fortune reported.
The news is especially troubling for homeowners in areas such as Boise (Idaho), Charlotte (North Carolina) and Austin (Texas), which, according to Moody's Analytics, were the three most overvalued areas in the country with excesses of up to 72%. In total, according to the analysis, 183 of the country's 413 largest regional real estate markets are overvalued by more than 25 percent.
- FORTUNE (@FortuneMagazine) August 25, 2022
Among the areas with the most overvalued real estate in the country are large cities such as Los Angeles, Orlando, Seattle and Indianapolis, where real estate is estimated to be up 30%. Houston homes are overpriced by 34.5%, while Montana homes are overpriced by 25%.
According to the New York Post Moody's estimate of prices falling by as much as 20% if the recession continues is in line with estimates from other financial agencies. Fitch Ratings estimated that prices will fall about 15% nationwide, and economist Robert Shiller, who predicted the housing collapse in 2008, estimates a decline of about 10%.
The estimates come as the U.S. housing market experienced its sixth consecutive month of declining sales, the lowest level since 2020. According to the National Association of Realtors report, sales fell by almost 6% in July.
The data coincides with the increase in mortgage rates over the last year. Buyers are faced with purchasing a home at a high price with high rates that make it difficult to recoup the investment. The average home price surpassed $400,000 for the first time, reaching $413,500. Everything points to a perfect storm in the real estate market.