Case in point Wells Fargo economist Charlie Dougherty, who in March expected U.S. home prices to decline 4.5 percent in 2023, and by October (when mortgage rates were approaching 8%) he revised his home values estimates saying that would instead gain 1.8% in the year just "gone."
He was not the only one though.
His peers at Morgan Stanley and Goldman Sachs, along with economists polled by Bloomberg, were also bullish on prices, new home sales and mortgage rates in 2023 - often reversing directions from earlier forecasts.
The reviews show that early on many underestimated the resilience of the residential real estate industry's demand in the face of rising mortgage rates and did not fully realize the pressure low interest rates had on potential sellers - affecting available inventory and prices.
"If I were to put myself back in early 2023 when we were writing this report, I would say that the strength of the economy was one of the biggest factors, helping housing activity and house prices to be a bit more resilient than expected." , Dougherty told Yahoo Finance in an interview. "It's hard to predict. That's one of the challenges of predicting these things is they're all different factors."
Revised home price estimates
Since October, home prices have risen 4.8% year over year, according to the latest data from the S&P CoreLogic Case-Shiller National Home Price Index, marking the fastest increase so far. That's more in line with James Egan's prediction last month of the year that home prices would appreciate 4% year-on-year from December 2022. However, it took the Morgan Stanley chief a long time to come up with such an accurate estimate. forecast.
Going into the year Egan predicted that prices would fall by 4%, instead of rising that much. In June, he revised his forecast, saying prices would be flat into 2023. In August, he noted that the brief drop in prices earlier in the year would be short-lived. "We forecast the Case-Shiller to be -0.2% y/y/+0.8% m/m," he wrote in August.
Other Wall Street banks were on the same wavelength, expecting home prices to fall over the period under review, including Goldman Sachs fixed income strategist Vinay Viswanathan, who predicted in March that home values would fall 6, 1% on an annual basis. In June, he lowered his forecasts considerably, expecting a drop of just 2.2%.
