In a speech last week, Fed Governor Christopher Waller acknowledged that there may be a “material correction.” 

 Here are key takeaways from Waller’s speech:

• The decline in pending home sales in August suggests that sales will continue to fall
• Builders have already begun cutting their list prices, offering large incentives, and pulling back on starting new single-family homes
• While this market correction could be fairly mild, there may be a much larger drop in demand and house prices before the market normalizes

Realtor.com expects three market trends to continue into 2023:

• Home prices are likely to fall 10%-20% nationwide
• The number of new listings will continue to drop (they were down nearly 10% in September) as sellers pull back
• There will not be a big wave of foreclosures, as demand still outweighs supply, lending standards have been tighter, and borrowers have been more qualified

Redfin determined that the average affordable home on a $3,000 monthly budget has shrunk 142 square feet since last September. This is due to rising interest rates and home prices pushing down what buyers can afford.

• The most significant home size change occurred in San Diego, where these homes have shrunk by 435 square feet

Sources: The Blueprint, Redfin, Realtor.com, Federal Reserve