Housing Market Predictions 2023
In this blog post, we'll be discussing what experts are forecasting for the United States housing market in 2023. Will house prices go down in 2023? There is no one-size-fits-all answer to this question, as the housing market in the United States will likely vary depending on location and other factors. However, some experts believe that the market will decline in 2023, while others believe that home prices will rise.
Most experts in the housing industry predict less buyer demand, lower prices, and higher borrowing rates. Rate increases, along with a shortage of availability, have pushed many purchasers to the sidelines. Home prices may fall slightly, but not drastically as they did in 2008. Some believe that the housing market will continue to outperform compared to the pre-pandemic.
The housing market is always in flux, and predictions for the future can be challenging to make. However, experts are making some educated guesses about what we can expect in the coming years. Here's a look at some housing market predictions for 2023. According to a Forbes Advisor article, home prices are expected to continue to come down slowly, making it difficult for many homebuyers to access affordable housing.
ALSO READ: Lastest National Housing Market Trends
However, the article notes that there may be some relief for buyers in the form of more inventory becoming available on the market. This may help to level out the playing field, making it easier for more people to find a home that they can afford. Another prediction from US News & World Report is that the housing market will experience a relatively shallow recession that stops and starts in 2023.
This prediction assumes that inflation will be under control by 2024, allowing mortgage rates to remain stable. In this scenario, home prices are expected to rise, but at a slower pace than they have been in recent years. Zillow also has some predictions for the housing market in 2023. One of the most positive is that housing affordability is expected to improve slightly. While high monthly mortgage costs and low inventory will continue to be a challenge, there are signs that conditions may stabilize.
This could be good news for first-time homebuyers, who have been struggling to find affordable homes in recent years. Another Zillow prediction is that home prices will continue to rise but at a slower pace. This could be due to a number of factors, including higher interest rates, more inventory becoming available on the market, and a slowdown in the rate of job growth. While this may make it more difficult for some buyers to afford a home, it could also make it easier for others to find a property that fits their budget.
Finally, some experts predict that the housing market will continue to be shaped by changing demographics. For example, as baby boomers continue to retire, they may be more likely to downsize their homes, creating more opportunities for younger buyers to enter the market. Additionally, millennials are expected to continue to be a driving force in the housing market, with many of them reaching their peak homebuying years in the coming years.
Of course, these predictions are just that – predictions. The housing market can be unpredictable, and unforeseen factors can always come into play. However, these educated guesses can give us a general idea of what we can expect in the coming years. If you're planning to buy or sell a home in 2023, it may be helpful to keep these predictions in mind as you make your plans.
Zillow, the leading online real estate company, has released its Home Value and Sales Forecast for March 2023. The forecast shows that the recent resilience of home prices has resulted in a slight upward revision to the national Zillow Home Value Index (ZHVI) forecast for the next 12 months. However, the outlook for home sales has been revised downward due to elevated competition and persistently low supply.
According to the Zillow forecast, the national ZHVI rose 4.4% in the 12 months ending in February 2023, and it is expected to continue to rise by 0.6% over the next 12 months. This is a slight upward revision from February's forecast, which projected growth of 0.2% in the next 12 months. Despite elevated interest rates, home prices are expected to remain resilient due to the shortage of new for-sale listings.
However, Zillow has revised its expectations for home sales in 2023. The company now expects 4.3 million existing homes to be sold in the calendar year 2023, a 14% decrease compared to 2022. This is down slightly from February's forecast of 4.6 million sales in 2023. The weaker-than-expected performance of leading indicators of home sales, combined with a perceived increase in higher mortgage rates, drove the downward adjustment.
The persistently low supply of homes for sale is the primary reason for the elevated competition in the housing market. The shortage of homes is causing homebuyers to compete fiercely for the available inventory, resulting in higher prices. Elevated interest rates are also presenting affordability challenges for buyers, but the shortage of homes for sale is helping to buoy home prices.
Zillow's forecast does not reflect the recent turmoil in the banking sector and subsequent changes to monetary policy, which have introduced fresh uncertainty to the outlook for the economy and housing market. Therefore, the actual outcome may differ from the forecast, and the situation is still evolving.
In its most recent prediction, Fannie Mae reiterated its opinion that the housing market is expected to remain subdued in 2023, with home sales staying slow but seeing a slight increase compared to previous estimates. Total home sales are expected to be 4.67 million units in 2023, up from a previous forecast of 4.52 million, but still the slowest annual pace of sales since 2011.
The ESR Group's report suggests recent mortgage application data came in stronger than expected, leading to an upward revision of the home sales outlook in the near term. However, interest rates have trended upward since the forecast was made. The report also forecasts a partial rebound in 2024 with total sales rising 9.6 percent to 5.12 million units.
The outlook for single-family mortgage originations is expected to be $1.69 trillion in 2023, a substantial contraction from the estimated 2022 volume of $2.36 trillion. The forecast for 2024 is $2.03 trillion. Affordability challenges are expected to remain elevated, and homebuilding is not expected to be enough to satisfy demand.
Top 5 Metros Where House Prices Will Drop Most by March 2024
Some regional markets are projected to see home price declines. In their latest forecast, they now predict that home values will fall in 253 of the nation's 895 regional housing markets between March 2023 and March 2024. Houma, a city located in southern Louisiana, tops the list with an expected decline of 8.0% in home prices by March 2024.
|Metro Area||Change in Values|
|Alice, TX & McComb, MS||-7.6%|
|Big Spring, TX||7.5%|
Top 5 Metros Where House Prices Will Increase Most by March 2024
Zillow still predicts that the vast majority of regional housing markets will see home values appreciating in 2023. Among the 897 regional housing markets Zillow economists analyzed, 631 markets are predicted to see rising house prices over the next twelve months ending with March 2024. Another 11 markets are predicted to remain flat. The housing market in Kentucky (Murray) is forecasted to see the highest year-over-year house price growth of 13.1%.
|Metro Area||Change in Values|
|Mountain Home, ID||+9.8%|
Summary of Experts' Forecasts for the Housing Market in 2023
Selma Hepp, interim lead of the Office of The Chief Economist at CoreLogic: Real estate activity and consumer mood regarding the housing market plummeted after the recent increase in mortgage rates above 7%. In October, home price increases remained close to single digits, and this trend is expected to persist through the rest of the year and into 2023.
Some housing areas have experienced major recalibration since the spring price high and are projected to incur losses in 2023. Nonetheless, more deteriorating inventory, some relief in mortgage rate rises, and reasonably optimistic economic data may help eventually stabilize home values.
The top economist at Realtor.com, Danielle Hale: In 2023, the housing market could feel more like a buyer's market than a seller's market after being in a sellers' market for several years. While the 22.8% increase in listings should be good news for buyers, it's mostly due to homes taking longer to sell due to tighter affordability. In 2023, the national annual median price for homes for sale is projected to rise by another 5.4%, which is less than half the pace seen in 2022.
Even if a homeowner decides to sell their home, they will likely have a lot of equity in it. However, as buyers and sellers pull back from a housing market and economy in transition, we anticipate house sales to be significantly lower, down 14.1% compared to 2022. The rate of home sales in late 2022 is a good indicator of what the annual total for 2023 would look like.
Chief economist and senior vice president of research at the National Association of Realtors, Lawrence Yun: In 2023 and beyond, the real estate market in Atlanta will be the one to watch as 4.78 million existing homes are sold at stable prices. The median home price will rise to $385,800, an increase of only 0.3% from this year's level ($384,500), while home sales will fall 6.8% compared to 2022's level (5.13 million).
There's a chance that half of the country may witness price increases, while the other half will see price drops. Nonetheless, the markets in California may be an outlier, with San Francisco perhaps seeing price decreases of 10-15%. Following a 7% increase in 2022, rents will go up by 5% in 2023. In 2023, the foreclosure rate will be lower than ever before, accounting for less than one percent of all mortgages.
This is less than half the average historical rate of 2.5%, therefore the 1.3% GDP growth will be a significant slowdown. As the Fed lowers the pace of rate hikes in an effort to contain inflation, the 30-year fixed mortgage rate will fall to 5.7% in late 2022 from its peak of over 7% at the time. This is significantly lower than the pre-pandemic average of 8%.
Taylor Marr, Associate Chief Economist at Redfin: Mortgage rates are expected to fall further in the new year as a result of taming inflation and expectations that the Federal Reserve would ease rate hikes in the next year, which will boost demand for house purchases. But demand is still well below its high, so it's too early to declare a comeback or even a recovery.
We are keeping an eye on the job market for signs of sustained deceleration in price growth. Higher salaries and consequent price increases are one effect of a robust labor market like the one we're experiencing right now. A small increase in unemployment and/or slower economic growth would definitely help bring down mortgage rates even further, which seems paradoxical. If this trend continues into 2023, the boost in demand seen thus far may be reflected in a rise in pending sales.
Senior economist at Zillow, Jeff Tucker: The softening of the rental market has not yet resulted in any significant respite for tenants. There is hope, though, that prices will decrease in the coming months. Rent increases have slowed from a record 17.2% in February to 8.4% in November. Data like this is encouraging for renters hoping to sign a new lease in 2023, but they should still keep a careful eye on the market and move swiftly if they locate a rental that meets their needs and budget.
Since rental rates are still higher than they were before the outbreak, compromise and adaptability will be required well into next year. Tenants with leases coming up for renewal should realize that they have greater leverage to negotiate this year and should look around at comparable rentals in the area before making a decision. Which forecast mentioned above do you think is more accurate?
Will Home Prices Drop in 2023: What Do Market Trends Predict?
Here's when home prices can drop. While this may appear to be oversimplified, it is how markets work. Prices drop when demand is met. There is now an excessive demand for houses in several property markets, and there simply aren't enough homes to sell to prospective purchasers. Home construction has increased in recent years, although they are still far behind. Thus, big drops in housing prices would necessitate considerable drops in buyer demand.
Demand falls mostly as a result of higher interest rates or a general weakening of the economy. Rising interest rates would ultimately need far less demand and far more housing supply than we now have. Even if price growth slows this year, a drastic fall in home prices is quite unlikely. As a result, there will be no fall in house values; rather, a pullback, which is natural for any asset class. According to many experts, in the United States, house price growth is forecasted to “moderate” or maybe slightly drop in 2023.
What's happening in the housing market right now? The housing market has been a hot topic of discussion over the past few years, with record-low mortgage rates and high demand driving prices up. However, recent data suggests that the market is cooling off, with smaller gains in asking prices and an increase in the number of days homes are spending on the market. In this section of the article, we will take a closer look at the current state of the housing market.
Smaller Gains in Asking Prices and Longer Time on the Market
According to recent weekly data from Realtor.com, the median listing price grew by 3.2% over last year. While home prices typically follow a seasonal advance in the spring, with the median list price climbing above $424,000 in March, momentum has slowed, and that’s reflected in smaller gains in asking price trends. This week’s 3.2% growth is the slowest since May 2020. This means that while home prices are likely to continue to climb through the summer, as is typical for the season, the jumps will be smaller than we saw in 2022. That will likely cause the measured asking price of for-sale homes to drop this summer.
New Listings and Active Inventory Growth
New listings, a measure of sellers putting homes up for sale, were again down, this week by 32% from one year ago. The number of newly listed homes has been lower than the same time the previous year for the past 40 weeks. This past week, the gap from last year increased more significantly, perhaps due in part to shifts in religious holidays that fell earlier in 2023. Nevertheless, the number of newly listed homes remains a weak spot in the 2023 housing market, keeping home sales low despite a February uptick.
Active inventory growth continued to climb, but at a notably lower rate, with for-sale homes up 44% above one year ago. With homeowners increasingly likely to sit on the sidelines instead of selling, homebuyers still outnumber new sellers in a market with a smaller number of both buyers and sellers. Many of the conditions that caused us to call 2023 a ‘nobody’s market’ persist, and while the housing market remains challenging for both buyers and sellers, the uptick in February's existing home sales suggests that shoppers are waiting for mortgage rate dips that create opportunities to move ahead.
Homes Spending More Time on the Market
Homes spent 19 extra days on the market compared to this time last year. For 36 weeks, it’s taken longer to sell a home compared to the same week one year ago. This week marked a slight uptick to 19 days after 5 straight weeks of an 18-day gap. Suffice it to say, the housing market is not moving at the same pace as it did in 2022 or even 2021, but it hasn’t yet slowed to a pre-pandemic pace. March housing data show that homes are still spending 15 days less time on the market compared to pre-pandemic years.
CoreLogic Home Price Insights Report: February 2023 Analysis and Forecast
The CoreLogic Home Price Insights report offers an extensive view of the Home Price Index (HPI) product with analysis up to February 2023 and forecasts up to February 2024. This report features interactive data that provide early indicators of home price trends. With HPI, turning points in the housing market can be anticipated sooner.
CoreLogic HPI Forecasts™ offer a 30-year projection of CoreLogic HPI levels for two tiers: Single-Family Combined (both Attached and Detached) and Single-Family Combined excluding distressed sales. This forecasting system provides insights for predicting trends for the next 12 months and beyond.
National Home Prices: February 2023
According to the CoreLogic Home Price Insights report, home prices nationwide, including distressed sales, increased year over year by 4.4% in February 2023 compared with February 2022. On a month-over-month basis, home prices increased by 0.8% in February 2023 compared with January 2023. CoreLogic revises its data with each release to ensure accuracy, and this report is no exception. Newly released public data has been incorporated to provide updated results.
National Forecast Prices: February 2023 to February 2024
The CoreLogic HPI Forecast indicates that home prices will increase on a month-over-month basis by 0.2% from February 2023 to March 2023 and increase on a year-over-year basis by 3.7% from February 2023 to February 2024.
Year-Over-Year Home Price Depreciation: Western States Hit Hardest
Although annual U.S. home price growth rose for the 133rd straight month in February, the 4.4% increase was the lowest recorded since 2019. Eight states and districts recorded annual home price losses, with much of the depreciation seen in the relatively expensive Western U.S., including California, Idaho, Oregon, Washington, and Utah.
Tech company layoffs have likely affected housing demand on the West Coast. However, as noted in the latest CoreLogic S&P Case-Shiller Index, home price gains are holding steady in some large East Coast metros, as workers return to offices and buyer demand renews in areas that saw relatively less appreciation during the pandemic. Areas in the Southern U.S. are also holding up well given current market conditions.
The Divergence in Home Price Changes across the U.S.
According to Selma Hepp, Chief Economist for CoreLogic, “The divergence in home price changes across the U.S. reflects a tale of two housing markets.” Declines in the West are due to the tech industry slowdown and a severe lack of affordability after decades of undersupply. The consistent gains in the Southeast and South reflect strong job markets, in-migration patterns, and relative affordability due to new home construction.
HPI National and State Maps: February 2023
The CoreLogic HPI provides measures for multiple market segments, referred to as tiers, based on property type, price, time between sales, loan type (conforming vs. non-conforming), and distressed sales. Broad national coverage is available from the national level down to ZIP Code, including non-disclosure states.
Nationally, home prices increased 4.4% year over year in February. California, Idaho, Montana, Nevada, Oregon, Utah, Washington, and Washington, D.C. saw annual declines in home prices. The states with the highest increases year over year were Florida (11.3%), Maine (10.3%), and South Carolina (9.2%).
HPI Top 10 Metros: February 2023
The CoreLogic HPI provides measures for the top 10 metros in the U.S. based on population size. According to the February 2023 report, all top 10 metros experienced home price increases on a year-over-year basis, with Las Vegas-Henderson-Paradise, NV leading the pack with a 13.2% increase. Other metros with significant gains included Orlando-Kissimmee-Sanford, FL (12.3%) and Miami-Fort Lauderdale-West Palm Beach, FL (11.6%). The smallest gains were seen in Chicago-Naperville-Elgin, IL-IN-WI (1.9%) and New York-Newark-Jersey City, NY-NJ-PA (2.4%).
Top Markets at Risk of Home Price Decline in 2023: Analysis and Forecast
The CoreLogic Market Risk Indicator (MRI) is a tool used to evaluate the overall health of housing markets across the United States. This indicator takes into account a variety of factors, such as unemployment rates, home prices, and foreclosure rates, to determine the likelihood of a market experiencing a decline in home prices over the next 12 months.
According to the latest MRI update, Provo-Orem, UT is at a very high risk (70% or higher probability) of experiencing a decline in home prices in the next year. Additionally, Ogden-Clearfield, UT, Salt Lake City, UT, Lakeland-Winter Haven, FL, and Boise City, ID are also considered to be at very high risk for price declines.
The high risk level in these markets may be due to a variety of factors, such as oversupply, weak demand, or economic uncertainty. Homebuyers in these markets should be cautious and consider their options carefully before making any purchasing decisions. Homeowners in these markets may want to monitor the situation closely and be prepared for a potential decrease in their home's value.
It's important to note that the MRI is not a guarantee of future market performance, but rather an indication of the current conditions and potential risks. Real estate markets can be complex and affected by a variety of factors, and it's always wise to consult with a professional before making any major decisions.
U.S. House Price Index – March 2023
The Federal Housing Finance Agency (FHFA) has released the U.S. House Price Index for March 2023, indicating a 0.2% increase in January 2023 from December 2022. The annual change in house prices from January 2022 to January 2023 was 5.3%, while the 0.1% decline reported for December 2022 remained unchanged.
Seasonally Adjusted Monthly Price Changes by Census Division:
The FHFA's report also indicates seasonally adjusted monthly price changes for nine census divisions in the US from December 2022 to January 2023. The Pacific division saw a -0.6% change, while the New England division saw a +2.0% change.
12-Month Changes by Census Division:
The report further highlights the 12-month changes in house prices by census division. The Pacific division saw a -1.5% change, while the South Atlantic division saw a +9.6% change.
Insights from FHFA:
According to Dr. Nataliya Polkovnichenko, Supervisory Economist in FHFA's Division of Research and Statistics, “U.S. house prices changed slightly in January, continuing the trend of the last few months. Many of the January closings, on which this month's HPI is constructed, reflect rate locks after mortgage rates declined from their peak in early November. Inventories of available homes for sale remained low.”
U.S. House Price Index Report – 4Q 2022: FHFA HPI®
According to the Federal Housing Finance Agency (FHFA), U.S. house prices rose 8.4 percent between the fourth quarters of 2021 and 2022. The U.S. housing market has experienced positive annual appreciation each quarter since the start of 2012. FHFA’s seasonally adjusted monthly index for December was down 0.1 percent from November. Here are the significant findings of the report.
State-Wise House Prices
House prices rose in all 50 states, while prices declined in the District of Columbia between the fourth quarters of 2021 and 2022. The five areas with the highest annual appreciation were Florida (15.2 percent), North Carolina (13.4 percent), South Carolina (12.9 percent), Hawaii (12.8 percent), and Maine (12.2 percent). The areas showing the lowest annual appreciation were the District of Columbia (-0.8 percent), California (2.3 percent), Idaho (3.1 percent), Oregon (3.6 percent), and Washington (3.7 percent).
House prices rose in all but six of the top 100 largest metropolitan areas over the last four quarters. The annual price increase was greatest in North Port-Sarasota-Bradenton, FL at 20.1 percent. The metropolitan area that experienced the greatest price decline was Oakland-Berkeley-Livermore, CA (MSAD) at -4.3 percent.
Of the nine census divisions, the South Atlantic division recorded the strongest four-quarter appreciation, posting a 12.4 percent increase between the fourth quarters of 2021 and 2022. Appreciation was weakest in the Pacific division, where prices rose by 2.9 percent.
The Slowdown in House Price Appreciation
“House price appreciation continued to wane in the fourth quarter,” said Dr. Polkovnichenko, Supervisory Economist in FHFA’s Division of Research and Statistics. “House prices grew at a much slower pace in recent quarters amid higher mortgage rates and a decline in mortgage applications. These negative pressures were partially offset by historically low inventory.”
Conclusion: Will Housing Prices Drop in 2023?
The broader outlook from several housing analysts is that housing demand will continue to surge due to several factors. For e.g; the millennials have aged into their prime homebuying years, and they are now the fastest-growing segment of home buyers. In 2018, millennial homeownership was at a record low but the situation has changed markedly. They are no longer holding back when it comes to homeownership.
According to the 2023 Home Buyers and Sellers Generational Trends report from the National Association of Realtors, the demand for homes is increasing among baby boomers, who now make up the largest generation of homebuyers in the US, accounting for 39% of home buyers in 2022, up from 29% in 2021.
On the other hand, younger and older millennials' combined share of homebuyers decreased from 43% in 2021 to 28% in 2022. Generation X made up 24% of total buyers, and Generation Z makes up 4% of homebuyers, with 30% of Gen Z moving directly from a family member's home into homeownership.
Furthermore, buyers are now moving farther distances, with younger boomers moving the greatest distance at a median of 90 miles away. Additionally, all generations agreed that the most common reason to sell was to be closer to friends and family. Buyers expect to live in their homes for 15 years on average, up from 12 years in 2021.
Overall, the report suggests that demand for homes is growing among baby boomers and Generation Z while decreasing among younger and older millennials. Buyers are moving farther distances, with a desire to be closer to friends and family being the most common reason to sell. Buyers also view owning a home as a good investment, with a majority of buyers using a real estate agent to help with the purchase.
Hence, housing prices cannot drop drastically in 2023. Although the housing market appears to be cooling from 2023 through 2024, there are some bright spots. Economic forecasters, despite the recent recession, continue to expect robust demand from purchasers (millennials) and high home price increases in the housing market.
With homebuyers active and supply still lacking, the current trend of home prices will not see a major downfall. Despite a sluggish market and waning buyer enthusiasm, we anticipate that home demand will continue to outstrip available inventory. Increasing rental costs should add to this expected development.
However, as the number of available homes increases, the demand for housing should decrease owing to affordability concerns. As a result, we are not on the verge of a housing market crash. The rate of home price growth during the two years od the pandemic was unsustainable, and higher mortgage rates combined with increased inventory will result in slower home price growth but unlikely any big price decline.