Today's top story: For the first time, Fannie Mae now expects home prices to fall next year.

Hi everybody, Joe Hillner with Your Home Sold Guaranteed Realty, where we guarantee the sale of your home or I'll buy it! 

Ok, so every week, I share market data to keep you informed with the local real estate market.  

Here is this week’s Boca Market Watch.

First, Single Family Homes:

This past week, 47 new listings, the new normal, and ranging in price from $429K to $11M!  17 homes back on the market, while 79 homes listed took a price decrease, wow, and 6 sellers raised their asking price.  And an even worse week,  with just 27 different properties under contract, and 10 going pending, very disappointing! 22 homes were unsuccessful in selling and were taken off the market or the listing expired outright.  And a poor week for sales with 38 homes sold, ranging from $315K to $25.75M - now that's what I'm talking about!

Next up, Condos and Townhomes:

68 new listings, a little better,  and ranging from $110 Grand to $7.3 Million.  16 units came back on the market, 41 properties with a price decrease, and 8 sellers with an increase.  And a terrible week with 34 different properties under contract, and only 16 going pending,  19 condos or townhomes were unsuccessful in selling and were taken off the market or the listing expired. 37 closed sales this week, that's pathetic, and ranging in price from $147K to $1.2M.

Here's what's making news right now.

Economists at Fannie Mae project national home prices to decline by 1.5% and home sales by 21% in 2023.  In their most pessimistic forecast of the year to date, Fannie Mae analysts were forced to recognize that Federal Reserve policymakers continue to struggle to get inflation under control, but are resolved to make that happen.

Fannie Mae Chief Economist Doug Duncan said in a statement, "the slowing effect on the housing market of the higher mortgage rate environment has been largely predictable, and home prices appear to have already begun trending downward.”

Falling home prices and home sales aren’t expected to generate the kind of shock to the financial system that produced the Great Recession of 2007-09, since most homeowners aren’t in danger of losing their homes as interest rates rise.  Everyone has equity in their home, so the rate of foreclosure is still stable.

Duncan also said, “Due to the minimal use of adjustable-rate mortgages (ARMs), teaser rates and exotic mortgage products, relatively few current single-family borrowers are subject to payment shocks from rising interest rates in the way many borrowers were in 2006-2008.”

The negative forecast is in stark contrast to Fannie's earlier projections.  In a Feb. 10 forecast, Fannie Mae economists envisioned annual home price appreciation would cool to the single digits in the second half of 2022 and gradually fall to 3.3 percent by the final quarter of 2023.

Of course, that was before the Fed started raising short-term interest rates at breakneck speed as tight labor markets and soaring energy prices, driven by Russia’s invasion of Ukraine, stymied the Fed’s efforts to curb inflation.

Beginning March 17, the Fed has raised short-term interest rates five times this year, including three consecutive 75-basis point increases to the federal funds rate. Fed policymakers are expected to implement another 75-basis point increase on Nov. 2.

As affordability becomes an even greater issue, pushing even more buyers to the sidelines, we have to expect the classic domino effect: as demand softens, homes sit on the market longer, inventory goes up and sellers are forced to respond by dropping prices.  It won't be long before our market tips over and becomes, dare I say it, a buyers market, oh my!