Soaring mortgage rates are shocking the U.S. housing market. As a result of this its both pricing out some stretched homebuyers and causing some would-be borrowers to lose their mortgage eligibility. The rise in mortgage rates a has research firms re-gearing their housing-market forecasts for 2023. Now, real estate researchers are dialing down their home price forecasts. On Wednesday, Zillow released a revised forecast, predicting that U.S. home prices would rise 14.9% between March 2022 and March 2023. That’s down 2.9 percentage points from last month, when Zillow said home prices would shoot up 17.8% over the coming year. The fact Zillow has cut its forecast isn’t a surprise. The swift move up in rates is creating a serious affordability crunch for homebuyers. At a 3.11% fixed mortgage rate in December, a borrower would owe a principal and interest payment of $2,138 on a $500,000 mortgage. That payment would spike to $2,718 if taken out at a 5.11% rate. Over the course of the 30-year loan, that’s an additional $208,800. The housing forecasts published during the COVID-19 recession tell a different story. In the spring of 2020, both Zillow and CoreLogic published economic models predicting that U.S. home prices would fall by spring 2021. That price drop never came. Instead, the housing market went on a historic run that continues to today.
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