Potential 5% Drop in Home Prices Linked to High Mortgage Rates

Home prices could potentially drop by 5% next year if mortgage rates remain at their current high levels, according to Morgan Stanley. The surge in mortgage rates, reaching the highest level since 2000, is expected to worsen affordability conditions in the short term. If mortgage rates stay around 8% for an extended period, it could have a more negative impact on home prices. However, the bank forecasts a decrease in mortgage rates in the future. Currently, home prices are still rising, with the median existing US home price increasing by 2.8% in September compared to the previous year.