It makes sense. On the way up, the Pandemic Housing Boom—which saw rents and home prices soar—was amazing for everyone from Airbnb hosts to home flippers to institutional buyers on Wall Street. However, last year’s historic mortgage rate shock has seen the national market flip from inflation mode to deflation mode. The fear of further price declines underpins many investors’ decision to remain on the sidelines.

“From December onward, the expectation from my side is we’ll have another 10% to 15% decline [in home prices] nationally,” Tejas Joshi, director of single-family residential at Yieldstreet, tells Fortune.

Yieldstreet, which owns over 600 U.S. homes, has put its money where its mouth is. In the second half of 2022, Joshi says, Yieldstreet reduced its homebuying levels by more than 90% in the face of falling home prices.

“We’re pretty much on pause across all [homebuying] strategies,” Joshi tells Fortune.

Through November, the Case-Shiller National Home Price Index has U.S. home prices down 2.4% from the June 2022 peak. However, Joshi says the lagged Case-Shiller reading is underreporting the actual decline. In his view, once his forecast of an additional 10% to 15% home price correction comes to fruition, U.S. home prices in the second or third quarter of 2023 will be about 20% below their 2022 peak.

"Obviously, some markets will be less impacted. Markets that'll be more impacted are the ones where you have a lot of inventory of new homes, like Phoenix, Las Vegas, Dallas, and Boise. These are markets with a lot of construction, with a lot of new homes… Those are the markets that'll be the leaders in terms of how much home prices decline. There will be some markets in the Northeast, which haven't had a lot of new construction, where home prices are expected to fare better in terms of declines," Joshi says.

Unless a home seller is going through a major life event like a divorce or a job relocation, they're usually resistant to selling below previous market highs. However, it's a different story for homebuilders: They lose money for each additional day a completed home sits on their balance sheet. That's why markets with lots of new construction, Joshi says, will be most prone to home price declines in 2023.

Homebuilders continuing to unwind their historic pipeline of unfinished homes should continue to depress new home prices through the first half of 2023, Zonda chief economist Ali Wolf tells Fortune. Knowing this, some sidelined institutional investors are already trying to sweet-talk builders into giving them sweetheart deals. And some builders, like Lennar, are actively shopping unsold homes to big-time investors.

“What’s an interesting dynamic with the institutional investors is a lot of them have been sitting on the sidelines waiting for that moment to strike…[They’re thinking,] Hey, I want to buy these homes from you [the builder], but I want to have a discount to do so,” Wolf tells Fortune. These institutional investors don’t just want markdowns in the 10% ballpark, they’re hoping for “20% and 30%” price cuts, says Wolf.

As home prices begin to bottom, Joshi says, Yieldstreet will slowly ramp up homebuying levels.

"Personally, I think [home prices will bottom in] the second quarter or third quarter in 2023," Joshi says. "At that point [when mortgage rates come back down closer to 5%] you'll see some demand come back, and that'll basically set a floor for how far home prices can fall."

Most real estate research firms, including Zonda and John Burns Real Estate Consulting, believe home prices will continue to fall in 2023. However, some firms like CoreLogic and Realtor.com think home price declines are already behind us.

Want to stay updated on the housing correction? Follow me on Twitter at @NewsLambert.