Are you searching for a reliable housing market prediction in 2023? You are not alone!
This blog post is all about housing market predictions in 2023.
It is understandable if you plan on buying or selling a house right now. The housing market has seen various unexpected fluctuations in a previous couple of years, so it makes sense for you to have all the facts before deciding whether to buy or sell. Although you may have yet to learn for sure, it is possible to research the opinion of experts and make a reasonable assumption.
As reported by Statista, the median cost of pre-owned homes in America during 2022 was $392K. However, this price tag is predicted to diminish in late 2023 and settle at around the $380K mark. Current predictions project that this pattern will persist into 2023 even if mortgage rates climb upward later next year.
What to Expect from the Housing Market in 2023
Attempting to predict the future of housing in the coming years can be tricky, yet some trends may help us gain insight into what lies ahead for 2023. So, to better understand this sector's potential trajectory, let's dive deep and explore some key factors that could have substantial sway over next year's market conditions.
What are the key factors pushing up housing prices?
A variety of influences contribute to the cost of homes. Still, some have a tremendous effect on real estate values. Primarily, these three factors play an essential role in setting market prices:
- Mortgage rates
- Available inventory
- Inflation
- Affordability
- Local market conditions
Mortgage rates
Mortgage rates are a critical factor when looking at long-term home ownership costs. At the beginning of February 30-year fixed-rate loans averaged 6.5 percent - much higher than in recent years. This increase translates to more expensive monthly payments and reduced purchasing power for buyers, making it harder for people to afford already high housing prices.
Industry Experts Anticipate Mortgage Rates in 2023:
Housing market prediction 2023/Mortgage rates/ Fannie Mae: 6.3%
The recent Housing Forecast from Fannie Mae reveals that the average 30-year fixed rate will likely dip from 6.5% in the first quarter of 2023 to a consistent 6% by year's end. Fannie Mae's senior vice president and chief economist, Doug Duncan, expressed his sentiments on Dec 19th: "It appears housing activity will continue at a sluggish pace even though mortgage rates have dropped lately due to prices still being too high for many during this pandemic era."
Housing market prediction 2023/Mortgage rates/ Freddie Mac: 6.4%
Freddie Mac's Quarterly Forecast for October 2022 is shockingly in sync with Fannie Mae's predictions. The mortgage giant has estimated that the 30-year mortgage rate will remain between 6.6% and 6.2% throughout 2023, which averages to an annualized rate of 6.4%.
Housing market prediction 2023/Mortgage rates/ Mortgage Bankers Association: 5.7%
MBA's December 2022 Mortgage Finance Forecast predicts a significant decline in 30-year fixed mortgage rates, beginning with 6.2% at the start of 2023 and closing the year at a great low of 5.2%. Joel Kan, MBA's Vice President and Deputy Chief Economist was enthusiastic about this prediction - it's hard to argue why not!
Housing market prediction 2023/Mortgage rates/ National Association of Realtors: 5.7%
The National Association of Realtors (NAR) senior economist and director of forecasting Nadia Evangelou predicts that the 30-year fixed mortgage rate will remain well below 6%, with an average of around 5.7% throughout this year! This makes spring and summer a great time to take advantage of these favorable mortgage rates.
Housing market prediction 2023/Mortgage rates/ Realtor.com: 7.4%
According to its chief economist Danielle Hale, the Housing Forecast for 2023 from Realtor.com is a cause for alarm, who predicts that the average 30-year fixed rate will exceed 7%. This estimate may be slightly exaggerated, but it's still within reach, as rates are expected to stay higher than they are today in 2023 - representing an urgent warning signal for all homeowners and prospective buyers making decisions during this period.
Housing market prediction 2023/Mortgage rates/ Redfin: 6.1%
A recent Redfin 2023 Housing Outlook report predicts that the 30-year fixed rate will drop throughout this year and, by the fourth quarter, could reach as low as 5.8%. It is expected to average out at 6.1% for 2021—but according to Taylor Marr, deputy chief economist of Redfin, with updated data showing cooling inflation and a moderating job market, rates may dip below 6% before we hit Q2!
Available inventory
The market has been a seller's paradise recently. High buyer demand and low inventory enable sellers to ask for higher prices. However, the pendulum of supply and demand is gradually shifting back towards balance - according to National Association of Realtors data, there was an extra 90,000 homes on the market in 2022 compared to 2021. This housing supply gradually increases, but if it continues through 2023, we can expect prices to decrease as availability increases.
What the experts are saying:
RE/MAX, LLC's president and CEO, Nick Bailey: Nick Bailey anticipates that the 2023 property market will remain strong as Americans continue to purchase and sell homes. Investors may be concerned whether there has already been a peak or if values will decrease. Still, fortunately, citizens in America continuously demonstrate their zeal for real estate investments regardless of economic conditions. Moreover, with inflation rates declining by springtime next year, Mr. Bailey is sure this trend will stay secure with optimistic outcomes ahead.
National Association of Realtors' chief economist and senior vice president of research, Lawrence Yun: Lawrence Yun predicts that 4.78 million existing homes will be sold in 2023, with prices remaining steady and Atlanta leading the real estate market during this period. Home sales are projected to decrease by 6.8%, down from 5.13 million in 2022; however, the median home price is expected to reach $385,800 – a nominal 0.3% increase compared to 2021 ($384,500). With the arrival of this new market shift, half of America could experience some slight increases in pricing, whereas the other may observe minor decreases.
Inflation
The U.S. Labor Department has recently announced an encouraging update for consumers: inflation is slowing down! Data released shows that in the past 12 months, prices have risen by 6.4%, a slight decrease from their initial rate of 6.5%. Although this still indicates an increase in overall costs across the economy, it provides some relief to those already facing struggles due to financial hardship experienced throughout 2020 and 2021 - proving there are potentially brighter days ahead!
Will the rate of inflation decrease?
At present, there is no definite answer. The Fed continues to target a 2% inflation rate, and how quickly this will occur depends on various unknown factors. In addition, experts need clarification on the labor market's unwillingness to conform to the standard economic trend. Jan Hatzius, Goldman Sachs' chief economist reported that current jobs news encourages the Federal Reserve to remain dedicated to its interest rates plan; he predicts they should reach 5% in 2023.
Affordability
One of the biggest challenges buyers may face in 2023 is affordability. Many cities have seen a decrease in median income, while others have seen an increase in housing prices. This could cause many first-time homebuyers to be priced out of the market or unable to make large down payments on expensive properties. However, it's not all doom and gloom, as the low-interest rates will help mitigate some of the affordability issues buyers may face. 2023 is expected to be an exciting year in the real estate market, with minor changes in median home prices, rent costs, and inflation rates. Despite some headwinds in select markets, Americans show no signs of slowing down their enthusiasm for real estate investments. Low-interest rates and a probable decrease in the inflation rate are two of the most significant factors shaping the market.
Local market conditions
Real estate is a highly localized business, and prices can drastically vary from one place to another. The job market of an area, the number of available housing units in the vicinity, and the cost of living all significantly affect local home values.
The Western cities with the most significant forecasted price drop are unsurprisingly those that have experienced immense buyer activity during COVID-19, according to money.com
- Phoenix, Arizona - down 18%
- Stockton, California - down 13%
- Las Vegas, Nevada - down 13%
- San Diego, California - down 12%
- Tucson, Arizona - down 11%
Here are the five cities where home prices are forecast to increase by the most, according to money.com:
- Scranton, Pennsylvania - up 2%
- Kansas City, Missouri - up 2%
- Hartford, Connecticut - up 2%
- Harrisburg, Pennsylvania - up 1.5%
- Omaha, Nebraska - up 1%
This blog post is all about housing market predictions in 2023.
CONCLUSION
The housing market in 2023 is expected to be a rollercoaster, though overall median home prices are projected to increase slightly. Inflation could decrease over the coming year, which would be an encouraging sign for buyers; however, affordability remains one of the biggest challenges potential homebuyers face. Additionally, local markets could be subject to dramatic shifts due to the unique conditions of each area. Ultimately, potential homeowners should carefully and thoroughly research their options before entering the market in 2023. To sum up, 2023 is expected to be an exciting year in real estate with a few minor changes: low-interest rates, a potential decrease in the inflation rate, and localized market conditions. These will shape the market in their ways and make it more complex for buyers and sellers alike.
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