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Housing Market Forecast 2024 & 2025: Predictions for Next 5 Years

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Housing Market Predictions for Next 5 Years

Are you curious about what the next 5 years hold for the U.S. housing market? Recent reports suggest that the housing market downturn could wipe $2.3 trillion in value, with experts predicting prices could still tumble another 10%. Rising mortgage rates, a lack of affordable housing, and the COVID-19 pandemic have all contributed to this decline, which could have far-reaching implications for the industry. In this article, we'll dive into the housing market predictions for the next 5 years and what they could mean for buyers and sellers.

The housing market is a crucial component of the US economy, and predicting its future trends and fluctuations can be difficult, especially as external factors can influence the market. Some economists are more hopeful, but even those who predicted price increases through 2023 are changing their tune. The US housing market is expected to continue to cool off in 2023 after a 40% boom during the Covid-19 pandemic, according to the National Association of Realtors (NAR).

Housing Market Predictions for Next 5 Years

Rising interest rates will increase the cost of mortgages for new buyers, but prices are unlikely to fall as they did during the 2008 market crash, as lending standards have become more robust. The market was driven higher during the Covid-19 pandemic by record low borrowing rates, encouraging purchases by first-time buyers, and a lack of supply because of underbuilding. Analysts and economists have different opinions on whether prices will be flat or collapse in the next five years. However, they agree that the housing market will experience a slowdown in the coming years.

ALSO READ: Will There Be a Drop in Home Prices in 2023?

The US housing market is driven by the supply of properties on the market and interest rates, which are used to set mortgage rates. In 2021, the median US existing home price climbed by 16.9% to $346,900, with sales of 6.12 million reaching their highest level since 2006. The market was driven by record-low interest rates, strong growth in prices and rentals for single-family homes, low foreclosure rates, and the 15-year high in sales.

However, the pandemic-driven boom came to an end in 2022, with pending home sales falling for the sixth consecutive month in November, down by 4% from October. The FHFA house price index remained unchanged at 392.70 points in October, well below the June peak of 397.58, but above the August dip of 392.

ALSO READ: Latest U.S. Housing Market Trends

Analysts and economists expect the US housing market to cool in 2023 but differ on whether prices will be flat by 2022 or collapse. The US Federal Reserve has signaled its intention to raise interest rates, which will likely lead to a slowdown in the housing market. However, prices are unlikely to fall as they did during the 2008 market crash, as lending standards have become more robust.

In the next five years, the US housing market is predicted to experience a slowdown, with prices either flat or experiencing a modest decline. According to a report by Zillow, home values are projected to increase by 5.5% over the next year, slower than the 16.9% increase seen in 2021. Zillow predicts that home values will increase by 3.5% in 2023, 3.4% in 2024, 3.3% in 2025, and 3.2% in 2026. The report also notes that the number of homes for sale will continue to be low, putting upward pressure on prices.

Looking further into the next five years, the US housing market is forecasted to see a slowdown in price growth, with some experts predicting a plateau in home prices while others foresee a moderate decline. The predicted slowdown is due to a combination of factors such as rising interest rates, an increase in the supply of homes, a decrease in demand, and affordability challenges for buyers.

Rising interest rates are expected to make it more expensive for buyers to borrow money to purchase homes. Mortgage rates have been at record lows for several years, but many economists predict that they will begin to rise in the coming years. Higher interest rates will decrease the buying power of potential buyers and lead to a decrease in demand, which will put downward pressure on prices.

Another factor contributing to the predicted slowdown in the housing market is an increase in the supply of homes. The lack of supply was one of the factors that drove the recent boom in home prices, but the situation is expected to change as new home construction increases. In addition, some homeowners who were hesitant to sell during the pandemic are expected to put their homes on the market in the coming years, increasing the inventory of homes for sale.

The overall affordability of homes is also expected to play a role in the future of the housing market. With home prices at record highs, many buyers are struggling to afford homes, particularly first-time homebuyers. This affordability challenge, combined with rising interest rates, could lead to a decline in demand and therefore a decline in prices.

Despite the predicted slowdown, it is important to note that many experts do not expect a crash in the US housing market similar to the one seen in 2008. Lending standards have become more robust, which should help prevent widespread defaults and foreclosures. In addition, the current economic climate is much different than it was in 2008, with a strong labor market and a more stable financial sector.

While the US housing market is expected to see a slowdown in price growth over the next five years, experts do not expect a crash similar to the one seen in 2008. Factors such as rising interest rates, an increase in the supply of homes, and affordability challenges for buyers are expected to contribute to the slowdown, but the overall health of the economy and lending standards should help prevent a catastrophic collapse.

Housing Market Predictions: Real Estate Forecast Next 5 Years

There is an abundance of speculation regarding the forecast of the housing market in 2023. However, what about the real estate forecasts for 2024, 2025, and so on? Although, it is quite difficult to forecast the housing market for the next five years here is an insight into what most experts predict can happen.

The COVID-19 pandemic has had a significant impact on the real estate and land use sectors. These effects will continue to impact the demand and supply of regional housing markets over the next five years. Emerging technologies, changing demographics, the state of local job markets, and the rise of remote work are some of the trends expected to shape the housing market in the future.

The U.S. News Housing Market Index provides a data-driven overview of the housing market nationwide and serves as one of the authoritative sources for the information presented in this article. While it is possible for median home prices to fall by 5% in 2024, if mortgage rates decline faster than predicted, home prices could remain mostly flat through the end of 2024.

However, if real incomes rise faster than inflation, the combination of extra purchasing power plus lower mortgage rates could boost affordability, home sales, and prices. If real incomes rise from 2025 through 2027, home prices will likely rise again by approximately 1% to 2% above the current inflation rate. However, it will likely take some time to reach the home value heights of mid-2022.

Housing Market Predictions for 2024

The year 2024 is expected to bring more stability to the housing market after a few years of uncertainty. With mortgage rates declining faster than expected, home prices are likely to remain mostly flat throughout 2024. This will be good news for buyers who have been waiting on the sidelines for a good time to enter the market.

According to the U.S. News Housing Market Index, the national housing shortage will continue through the end of the 2020s, making it a seller's market in many regions. The National Association of Home Builders predicts that the national housing shortage will last through the end of the 2020s. Due to the estimated pent-up demand for housing, which ranges from 1.5 million to nearly 3.8 million homes, it will take time for the nation's builders to find suitable land, skilled labor, and materials to create a much-needed supply.

The rising cost and consequences of climate change will also impact the housing market in 2024. Homebuyers and builders will have to factor in the costs of building homes that are resilient to climate change and extreme weather events. The total cost of homeownership will become a key metric, taking into account not only the purchase price and mortgage rates but also property taxes, maintenance costs, insurance premiums, and other expenses.

Housing Market Predictions for 2025

In 2025, the housing market is expected to start picking up again, with home prices rising by approximately 1% to 2% above the current inflation rate. This increase will be due to a combination of factors such as the rise in real incomes, lower mortgage rates, and increased affordability. However, it may take some time to reach the home value heights of mid-2022.

More buyers are expected to join with friends and family members to purchase homes, as intergenerational households, grown children “boomeranging” homes, and families created from friendships increasingly pool multiple income sources to purchase homes and avoid the uncertainty of housing costs as renters.

The ways homes are built are also expected to change in 2025. Emerging technologies such as 3D printing, factory-built structural components, and software that minimizes the waste of materials are likely to become more common in the construction industry. These methods are expected to improve building quality while speeding up construction timelines.

Housing Market Predictions for 2026

In 2026, the housing market is expected to continue its upward trend, with home prices rising at a moderate pace. The pent-up demand for housing is expected to be supplied between 2025 and 2030, according to the National Association of Home Builders. However, the changing demographics by 2030 will result in lower demand for new housing, which could lead to a slowdown in construction activity.

The trend of more buyers joining with friends and family members to purchase homes is expected to continue in 2026, as the rising cost of housing and the desire for more space and privacy drives people to pool their resources. This trend is likely to result in more multi-generational households and co-living arrangements.

The total cost of homeownership is expected to become an even more important metric in 2026, as buyers and builders factor in the cost of climate change and other external factors. The rising cost of insurance and building materials, along with the need to adapt to a changing climate, will make it essential for homeowners to consider the total cost of homeownership when making purchasing decisions.

Housing Market Predictions for 2027

Predicting the housing market for 2027 is a challenging task as it depends on various factors such as economic growth, interest rates, population growth, and government policies. However, based on the current trends and projections, it is possible to make some predictions. One potential trend that could affect the housing market in 2027 is the continued urbanization of populations.

This means that more people are moving from rural areas to urban areas, which will create a higher demand for housing in cities. As a result, there may be more construction of apartment buildings and townhouses to accommodate this growing population. Another factor that could influence the housing market is the continued rise of technology. With advancements in technology, people are becoming more mobile and can work from anywhere in the world.

This could lead to an increase in remote working, which may cause more people to relocate to suburban and rural areas. This, in turn, could lead to an increase in demand for single-family homes in these areas. In addition to these trends, it is also important to consider economic factors such as interest rates, inflation, and job growth.

Interest rates are a crucial factor in the housing market, as they affect the cost of borrowing money for a mortgage. If interest rates remain low, this could encourage more people to buy homes, leading to a rise in demand and prices. However, if interest rates rise too quickly, this could make it more difficult for people to afford a mortgage, leading to a decline in demand and prices.

Finally, government policies could also impact the housing market in 2027. For example, changes to zoning laws or building codes could affect the supply of housing, leading to changes in prices. Similarly, changes to tax laws could also impact the affordability of homes, leading to changes in demand.

In conclusion, the next few years are likely to bring significant changes to the housing market, with a combination of factors such as changing demographics, emerging technologies, and the impact of climate change driving demand and supply. The National Association of Home Builders predicts that the national housing shortage will last through the end of the 2020s, and the cost of ownership will become a key metric for buyers.

Despite the uncertainty caused by the pandemic and other external factors, the housing market is expected to remain strong, with opportunities for both buyers and sellers. It is important for all stakeholders to keep a close eye on the latest trends and developments in the market to make informed decisions.

These predictions and guesses provided are based on current trends and historical data. However, they are still subject to numerous variables and factors that may impact the housing market in unforeseen ways. Therefore, please note that these predictions and guesses are for informational purposes only and should not be considered financial or investment advice. Any decision made based on this information is solely at your own risk.

Will it Become a Buyer's Real Estate Market?

The US housing market has seen skyrocketing home prices for the past two years, with a shortage of inventory, low-interest rates, and high demand fueling the market. However, according to the latest Zillow Home Price Expectations Survey, this trend is expected to shift in the coming years. The report surveyed 107 housing market experts and economists from August 16–27, 2022. In this section, we will explore the predictions for when a buyer's market is expected to arrive and what the housing market will look like in the years to come.

2023: Expect a Shift in Favor of Buyers

According to the survey, the majority of panelists (56%) expect a significant shift in favor of buyers within the next year, making 2023 the year of the buyer. This shift is due to several factors, including sky-high mortgage costs, which are driving down competition among home shoppers. This shift is expected to exert additional pressure on the rental market, as priced-out potential homebuyers turn to rent.

However, the report also found that metros in the South and Midwest are the least likely to see price declines over the next year. In contrast, vacation market areas are most likely to see price declines. The panelists also predicted that rent growth and inflation should outpace stocks and home price appreciation over the next year.

2024: Further Decrease in Home Prices

While 56% of panelists predict a buyer's market in 2023, another 24% predict that the housing market shift would come in 2024. This prediction shows that the trend of a buyer's market will continue to strengthen over the next few years. Inexpensive Midwest markets, such as Columbus, Indianapolis, and Minneapolis, are expected to see the least decline in home prices over the next 12 months. Fast-growing markets in the South, such as Atlanta, Nashville, and Charlotte, are also expected to retain their heat. However, markets that saw some of the largest growth over the course of the pandemic, including Boise, Austin, and Raleigh, are projected to cool the fastest.

2025: Further Consolidation of the Buyer's Market

As per the survey, 13% of the panelists expect the market to favor home buyers in 2025. This further solidifies the buyer's market trend, which has been building up since 2023. Suburban and exurban areas are predicted by the panel to retain their heat over the next 12 months, while vacation areas and urban areas were considered the most likely to see price declines.

Overall, the report suggests that the US housing market will undergo a significant shift in the coming years, with home prices declining and a shift towards a buyer's market. This change is a result of several factors, including rising mortgage rates, a shortage of inventory, and sky-high prices that have pushed many prospective buyers to the sidelines.

Although this shift is expected to benefit buyers, high and rising rents could cut further into their ability to save up for a down payment, making it harder for some to transition from renting to owning. As the housing market continues to evolve, it will be important to monitor these trends to understand the implications for the broader economy.

References

  • https://www.zillow.com/research/daily-market-pulse-26666/
  • https://www.zillow.com/research/zhpe-q3-2022-buyers-market-31481/
  • https://capital.com/housing-market-predictions-for-next-5-years
  • https://realestate.usnews.com/real-estate/housing-market-index/articles/housing-market-predictions-for-the-next-5-years
  • https://www.nar.realtor/newsroom/nars-lawrence-yun-predicts-us-home-prices-wont-experience-major-decline-could-possibly-rise-slightly#

California Housing Market: Prices, Trends, Forecast 2023

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Will the California Housing Market Crash in 2023?

According to the latest data from the California Association of Realtors (CAR), the California housing market experienced a slight recovery in February 2023. The report shows a third consecutive month of improving sales, with favorable interest rates and softening home prices driving buyers to enter the market.

The statewide annualized sales figure of existing, single-family detached homes was 284,010 in February, up 17.6% from January but down 33.2% from the previous year. The median home price in February was $735,480, a decline of 2.1% from January and 4.8% from February 2022. Year-to-date statewide home sales were down 39.6% in February.

CAR President Jennifer Branchini noted that the recent shift towards more home sales in the lower-price segments is expected to continue and further soften home prices. However, with the availability of homes remaining extremely tight, and housing supply conditions not expected to improve any time soon, prices should find a bottom later this year as interest rates stabilize.

California Housing Market
Infographic Courtesy of CAR

The lower mortgage rates in California have given homebuyers an opportunity to enter the housing market and purchase properties at more affordable prices. However, the housing supply remains limited, making it difficult for buyers to find available properties that meet their criteria. This has led to increased competition among buyers, driving up the prices of available homes.

On the other hand, sellers have been facing challenges in the market due to declining home prices. The market conditions have made it harder for them to sell their properties at the prices they desire, leading to a slowdown in the number of homes being put on the market.

Despite the challenges, industry experts predict that the California housing market will continue to stabilize in the coming months, with prices gradually finding their bottom later in the year. While interest rates are not expected to remain low for long, buyers are encouraged to take advantage of the current window of opportunity and enter the market before prices start to rise again.

Overall, the California housing market is in a state of flux, with both buyers and sellers navigating through uncertain market conditions. However, with the continued support of favorable interest rates and increased housing supply in the future, the market is expected to find its equilibrium, providing opportunities for both buyers and sellers alike.

ALSO READ: Will the US Housing Market Crash?

California Regional Housing Market Trends

The California Association of Realtors (C.A.R.) recently released its housing market report for February 2023, which showed that the state's housing market experienced a decline in sales and median home prices. The report indicates that all regions in California, except the Central Valley, recorded sales declines of more than 30% from a year ago, with the Far North experiencing the most significant drop at -39.4%. Similarly, all counties monitored by C.A.R. had double-digit sales drops in February, with sales in 34 counties plummeting more than 30%.

California Sales Trends

The report shows that only four counties out of the 51 monitored by C.A.R. had a sales decline of less than 20% in February 2022. Mono County had the largest sales drop in February 2023 at -80.0%, followed by Lassen (-73.9%) and Glenn (-65.0%). The sales decline in some of these counties was partly attributed to the severe weather conditions experienced throughout California in the past few weeks.

The Central Coast and Southern California regions had sales drops of over 30%, with the Central Coast experiencing the most significant drop at -38.3%. The San Francisco Bay Area had a sales decline of -32.0%, and median home prices declined by double digits year-over-year, with prices sliding more than 13% in six Bay Area counties.

California Home Price Trends

At the regional level, median home prices dropped from a year ago in all major regions, with the San Francisco Bay Area declining the most and by double-digits year-over-year. With prices sliding more than 13 percent in six Bay Area counties, the Bay Area’s regional median price was down 19.2 percent from a year ago and the dip in February was the largest price decline since June 2009.

More than four out of five counties experienced year-over-year price declines in February, with 23 counties posting median price drops of more than 10%. Siskiyou had the sharpest decline of all counties at -38.8%, followed by Glenn (-28.5%) and Del Norte (-23.1%). Five counties recorded an increase in their median prices from a year ago, with Kings County recording the biggest price gain at an increase of 7.6% from a year ago.

  • San Francisco Bay Area had the highest year-over-year price decline of 19.2 percent, with the median price being $1,050,000.
  • Southern California had a year-over-year price decline of 2.0 percent, with the median price being $745,000.
  • The Central Coast had a year-over-year price decline of 6.2 percent, with the median price being $856,000.
  • The Central Valley had a year-over-year price drop of 3.4 percent, with the median price being $449,000.
  • The Far North had the highest year-over-year drop of 1.6 percent, with the median price being $369,000.

California Inventory Trends

Housing inventory in California slipped to the lowest level in four months, with the statewide unsold inventory index (UII) growing by 60% from the 2.0 months recorded in February 2022 to 3.2 months in February 2023. All price ranges posted an increase in UII from a year ago by 30% or more, with the sub-$500,000 range gaining the most at 45.9%.

Despite a smaller carryover of inventory due to an uptick in housing demand, 46 counties tracked by C.A.R. still recorded an increase in active listings from February 2022. Kings County posted the largest yearly growth of 127.4%, followed by Solano (104.8%) and Riverside (96.1%). However, five counties registered a decline in active listings from last year, with Del Norte (-32.4%) dropping the most year-over-year, followed by Mono (-20.7%) and Tuolumne (-15.9%).

Other Housing Market Trends

The California housing market has seen a significant shift in trends over the past year, with the median number of days it takes to sell a single-family home increasing to 28 days in February 2023 from just 9 days in February 2022. The sales-price-to-list-price ratio also decreased from 102.6% in February 2022 to 97.7% in February 2023.

However, the average price per square foot for an existing single-family home remains relatively high at $373, albeit down from $392 in February 2022. Additionally, the 30-year fixed-mortgage interest rate has risen substantially from 3.76% in February 2022 to 6.26% in February 2023, which could affect the affordability of housing for prospective buyers. Overall, the California housing market appears to be undergoing some changes, and it will be interesting to see how these trends evolve in the coming months.

California Housing Market Forecast 2023-2024

Here's the California Housing Forecast for 2023 released by the C.A.R. on October 12, 2022. A modest recession caused by an ongoing battle against inflation will keep interest rates elevated to suppress buyer demand and contribute to a weaker housing market in 2023, according to a housing and economic forecast released today by the CALIFORNIA ASSOCIATION OF REALTORS®. High inflationary pressures will keep mortgage rates high, reducing purchasing power and lowering property affordability for prospective purchasers in the coming year. As a result, housing demand and prices will fall throughout 2023.

  • Existing, single-family home sales are forecast to total 333,450 units in 2023, a decline of 7.2 percent from 2022’s projected pace of 359,220.
  • California’s median home price is forecast to decline 8.8 percent to $758,600 in 2023, following a projected 5.7 percent increase to $831,460 in 2022.
  • Housing affordability is expected to drop to 18 percent next year from a projected 19 percent in 2022.

According to C.A.R.'s “2023 California Housing Market Forecast,” existing single-family home sales will fall 7.2 percent next year to 333,450 units, down from 359,220 units in 2022. The forecast for 2022 is 19.2 percent lower than the 444,520 residences sold in 2021. The median home price in California is expected to drop 8.8 percent to $758,600 in 2023, after rising 5.7 percent to $831,460 in 2022 from $786,700 in 2021. Next year's median price rise will be slowed by a less competitive housing market for homebuyers and a stabilization in the mix of home sales.

According to C.A.R.'s 2022 projection, the U.S. gross domestic product of 0.5 percent in 2023, after a projected uptick of 0.9 percent in 2022. With California’s 2023 nonfarm job growth rate at 1.0 percent, up from a projected increase of 4.9 percent in 2022, the state’s unemployment rate will edge up to 4.7 percent in 2023 from 2022’s projected rate of 4.4 percent.

Stubbornly high inflation and growing economic concerns will keep the average for 30-year, fixed mortgage interest rates elevated at 6.6 percent in 2023, up from 5.2 percent in 2022 and from 3.0 percent in 2021 but will remain relatively low by historical standards.

California Housing Market Forecast 2023
Courtesy of Car.org

Housing Market Forecast for California Metro Areas

Let us look at the price trends recorded by Zillow over the past year. Based on the data provided by Zillow, the average California home value is $718,687, which represents a 0.7% increase over the past year. Additionally, homes in California are going to pending in around 31 days. The median sale-to-list ratio for January 31, 2023, is 0.99, with 29.2% of sales going over the list price and 55.9% of sales going under the list price.

Looking at the California MSA forecast data provided by Zillow shows a mixed picture. While some areas are projected to experience a decline in home values, others are expected to see an increase. For instance, Los Angeles, San Francisco, Riverside, Sacramento, and San Jose are all projected to experience declines in home values over the next twelve months.

For instance, San Jose, CA, is expected to see the biggest drop in housing prices, with a forecasted decrease of -1.6% by March 31, 2023, and an even bigger decline of -3.2% and -3.6% by May 31, 2023, and February 29, 2024, respectively. San Francisco, Riverside, Sacramento, Oxnard, and Santa Rosa are also expected to experience declines of over 1% by the end of 2023.

However, not all regions in California are expected to experience a decline in housing prices. Some regions, such as Santa Maria, Hanford, and Eureka, are forecasted to experience an increase in housing prices, with Santa Maria expected to see the biggest increase of 1.9% by February 29, 2024.

In conclusion, the data shows a mixed forecast for the California housing market. While some regions are expected to see a decline in housing prices, others are forecasted to experience an increase. Nonetheless, the overall trend seems to be a decline in housing prices, which could be attributed to various factors such as an oversupply of homes, high-interest rates, and economic uncertainty.

It is important to note that these forecasts are just predictions, and there are various factors that could impact the actual outcome, such as changes in the economy, interest rates, and housing supply and demand. However, the forecast data suggests that it may be a good time for prospective home buyers to start shopping around in the areas projected to experience a decline in home values, while those looking to sell may want to focus on areas where home values are projected to increase. Overall, it is essential to conduct thorough research and consult with real estate professionals before making any real estate decisions.

California Home Values Forecast
Source: Zillow

California Housing Market – Weekly Trends – March 13 2023

Based on the data released on March 13, 2023, the California housing market is experiencing mixed trends. The recent takeover of Silicon Valley Bank by Federal Regulators has created economic uncertainty and spooked investors, causing them to flee to the safety of the bond market. This has caused yields and mortgage rates to fall after rising above 7% in recent weeks. However, labor market data suggests that the economy is still running hotter than the Fed would like it to, and the upcoming inflation report will play a large role in whatever action they decide to take later this month.

One of the key issues affecting the California housing market is the shortage of inventory. The pace of homes being listed for sale has slowed significantly, with the number of new listings being added to the MLS each week falling by double-digits this whole year. This has led to a shrinking of available inventory, which is preventing a rapid recovery in sales activity. However, the tight supply is also helping to prevent more significant price declines, though prices are expected to slide further from last year’s peak.

Despite the shortage of inventory, mortgage delinquencies in California remain very low. Although there was a modest uptick in the 4th quarter, mortgage delinquencies finished the year at just 2.5%, well below the historical average of 4.2% between 1972 and 2000. This, along with homeowner equity that remains near an all-time high level and most homeowners locked into the lowest rate mortgages of all time, should prevent a flood of inventory from hitting the market and precipitating much larger price declines.

The recent increase in mortgage interest rates has pushed borrowers to either rush to lock in rates or wait on the sidelines for rates to come back down. Despite the rising rates, mortgage applications inched up according to the latest weekly mortgage applications survey by the Mortgage Bankers Association (MBA).

Overall, while the California housing market is facing challenges due to economic uncertainty and a shortage of inventory, low mortgage delinquencies and a slight increase in mortgage applications indicate some stability. However, with concerns about current market conditions growing and the upcoming inflation report, it remains to be seen how the market will perform in the coming weeks and months.

Is It a Good Time to Buy a Home in California?

The Fannie Mae Home Purchase Sentiment Index® (HPSI) decreased by 3.6 points from January, with four of the six components decreasing. The decline was driven by an uptick in the share of consumers reporting a bad time to sell a home and the share of those expressing concerns about losing their job in the next 12 months.

With home-selling sentiment now lower than it was pre-pandemic and homebuying sentiment remaining near its all-time low, consumers on both sides of the transaction are growing more cautious about the housing market.

The daily average for the week ending March 11, 2023, was 414 closed sales per day, 260 pending sales per day, and 213 new listings per day. The percentage of REALTORS® who believe sales will increase in the foreseeable future increased to 61.1%, an increase of 7.8% from the previous week's survey. Members indicate reduced demand, but a lack of listings keeps inventory reasonably tight.

According to C.A.R.'s, 19.2% of REALTORS® polled believe that prices will increase, an increase of 7.5% from the previous week's survey. The proportion of responders who think that listings will increase was 72.4%, an increase of 2.8% from the previous week.

The decision to buy a home in California ultimately depends on an individual's financial situation and personal preferences. However, recent trends in the housing market indicate that it may be a challenging time for buyers. The decrease in the Fannie Mae Home Purchase Sentiment Index® and the concerns about job security and selling a home may cause potential buyers to become more cautious.

Additionally, the low inventory of homes for sale and the high demand from buyers has created a competitive market, which could make it difficult to find a home at an affordable price. The recent uptick in mortgage rates could also make it more expensive to finance a home purchase.

Despite these challenges, some REALTORS® believe that sales will increase in the foreseeable future, and prices could go up. However, it's worth noting that the housing market is unpredictable and can change quickly.

In summary, while there may be challenges to buying a home in California right now, it's ultimately a personal decision that should be based on an individual's financial situation and personal preferences. Potential buyers should consult with a REALTOR® to assess their options and make an informed decision.

California Housing Market weekly trends
Source: CAR

Housing Affordability Trends in California – 4th Quarter 2022

Housing costs have been on the rise in California, which has impacted affordability. According to C.A.R.'s Traditional Housing Affordability Index, the housing affordability in California for existing, single-family homes declined to 17% in the fourth quarter of 2022, pushing it slightly above the 15-year low recorded earlier in the year. This drop is due to the rapid rise in mortgage interest rates.

The statewide median price of a single-family home also dipped on a year-over-year basis for the first time in 11 years. The report suggests that home prices are expected to continue to decline due to high borrowing costs. The share of households that could afford to buy a median-priced condo/townhome in California also continued to slide, dropping to 26% in the fourth quarter of 2022 from 36% a year ago. However, nationwide housing affordability also slipped in the fourth quarter of 2022, with 38% of the nation's households able to afford a median-priced home.

In the fourth quarter of 2022, the effective composite interest rate for a 30-year, fixed-rate loan was 6.80 percent, significantly higher than the 5.72 percent in the previous quarter and the 3.28 percent in the same quarter of the previous year. Despite the drop in housing affordability, the California housing market has seen some positive developments.

For instance, the statewide median price of an existing single-family home in California dipped on a year-over-year basis in the fourth quarter of 2022 for the first time in 11 years. This could potentially benefit homebuyers who have been struggling with high home prices in the state.

However, the decline in home prices is also indicative of softening demand in the market, which is expected to continue in the upcoming quarter as rates remain elevated. As a result, the market is likely to experience downward pressure on housing demand, which could potentially affect sales and inventory levels.

California Housing Affordability Index
Source: Housing Affordability Index By C.A.R.

C.A.R.’s HAI measures the percentage of all households that can afford to purchase a median-priced, single-family home in California. C.A.R. also reports affordability indices for regions and select counties within the state. The index is considered the most fundamental measure of housing well-being for homebuyers in the state.

  • Seventeen percent of California households could afford to purchase the $790,020 median-priced home in the fourth quarter of 2022, down from 18 percent in the third quarter of 2022 and down from 25 percent in the fourth quarter of 2021.
  • A minimum annual income of $201,200 was needed to make monthly payments of $5,030, including principal, interest, and taxes on a 30-year fixed-rate mortgage at a 6.80 percent interest rate.
  • More than one in four (26 percent) California home buyers were able to purchase the $610,000 median-priced condo or townhome.
  • A minimum annual income of $155,200 was required to make a monthly payment of $3,880.

Sources:

  • https://www.car.org/
  • https://www.car.org/aboutus/mediacenter/newsreleases
  • https://www.car.org/marketdata/data/countysalesactivity
  • https://www.car.org/marketdata/marketforecast
  • https://www.car.org/marketdata/marketminute
  • https://www.car.org/marketdata/interactive/housingmarketoverview
  • https://www.zillow.com/ca/home-values

AZ Housing Market: Prices And Forecast 2023

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Arizona Housing Market Forecast & Trends

The Arizona housing market has been experiencing steady growth over the past few years, and 2023 looks to be no different. According to the recent report released by Zillow, the average Arizona home value is $409,196, which is up 4.3% over the past year. This growth trend is expected to continue throughout the year, making it a promising time for buyers and sellers alike. In this blog post, we will take a closer look at the Arizona housing market trends in 2023 and what they mean for buyers and sellers.

The typical home value in Arizona is $409,196, which is up 4.3% over the past year. This growth trend is expected to continue throughout the year, making it an excellent time to invest in Arizona real estate. Here are some additional key takeaways. Based on the data provided, the Arizona housing market is expected to remain competitive in 2023. The median sale-to-list ratio of 0.983% indicates that homes are selling close to their initial listing price.

The high demand for homes is reflected in the 13.8% of sales being over the initial list price. However, there are still opportunities for buyers to find deals on homes, as 64.5% of sales were under the initial list price. The median days to pending of 47 days suggests that homes are selling quickly in Arizona. The market is expected to remain stable in 2023, with most regions showing slight decreases or increases in value.

The latest ZHVF data released by Zillow shows the forecasted percentage change in home prices for various regions in Arizona over the next year, with three different timeframes listed: February 28, 2023; April 30, 2023; and January 31, 2024. It appears that housing prices in most regions of Arizona are expected to decline slightly or remain relatively stable in the short term.

For example, the Phoenix metro area is projected to experience a 0.9% decline in housing prices by the end of February 2023, followed by a further 1.6% decline by the end of April 2023. However, the market is expected to rebound slightly by the end of January 2024 with a 0.2% increase in prices.

On the other hand, some areas are projected to see modest price increases over the same time period. For instance, Sierra Vista is expected to experience a 0.4% increase in housing prices by the end of February 2023, followed by a more significant 1.1% increase by the end of April 2023, and a further 2.6% increase by the end of January 2024.

It's worth noting that these projections are subject to a degree of uncertainty and can change based on various factors such as economic conditions, changes in demand, and other market fluctuations.

ALSO READ: Will the US Housing Market Crash?

The graph below depicts the median or average house value in the region over a number of years. Migration patterns, according to some analysts, are the fundamental reason for this hot housing market. Arizona continues to get a significant number of residents from California, Texas, Illinois, and Washington. There is a limited available supply of homes. Because of the high demand, homebuilders are unable to keep up with supply, and a housing bubble can't burst if there aren't enough homes for sale.

AZ Housing Market Forecast 2023
Source: Zillow

Here's Zillow's forecast for the metro areas in Arizona. Rising home values and listing prices, combined with limited inventory, indicate that Arizona's housing market is tilted toward sellers. This trend is likely to continue for the foreseeable future unless inventory grows faster than demand or rising interest rates ultimately dampens the demand to that extent.

Region Name Forecast for January 2024
Phoenix, AZ -0.2%
Tucson, AZ 1.1%
Yuma, AZ 1.9%
Lake Havasu City, AZ 1.5%
Flagstaff, AZ 0.9%
Sierra Vista, AZ 2.6%
Show Low, AZ 3.1%
Payson, AZ 3.1%
Nogales, AZ 2.1%
Safford, AZ 1.6%

If mortgage rates go on a decreasing trajectory in 2023, prospective buyers may return to the market to increase the demand.  The important thing to take away from the shortage of housing units is that economists anticipate that the price of homes may continue to rise slowly in the AZ housing market in 2023.

On the supply side, it favors the property sellers. The bottom line here is that a stark imbalance between supply and demand continues to put upward pressure on AZ home prices. This partly accounts for the somewhat bold Arizona real estate market forecast for coming years. The other factors are that the economy of Arizona is robust, but the state is struggling with elevated levels of inflation and housing price growth. In 17 different states, the unemployment rate is at an all-time low.

Arizona has 3.3 percent unemployment. The pace of population increase in Arizona is the fourth fastest in the country. A significant number of states saw a loss in population as a consequence of COVID-19, low birth rates, and migration to neighboring states. Florida, Texas, and Arizona are the three states with the most rapid population increases. Years of underbuilding are a key contributor to the low inventory.

According to a study conducted by the Weldon Cooper Center for Public Service at the University of Virginia, Arizona's population is projected to expand by 26.1% between 2020 and 2040 – an increase of 1,897,585 people. As the population is expected to rise yet there are only a few available homes on the market.

This also raises a bit of a concern that in Arizona wages are not keeping up with the rising costs of housing. When prices go up, some buyers can no longer afford to buy and drop out. The faster that pricing goes up, the more buyers tend to drop out, at least in a healthy market. Mortgage rates also play an impact here. In the past few years, interest rates have remained at historically low levels.

This is one of the causes that contributed to a countrywide increase in home-buying activity. However, rates have increased somewhat during the previous several months in 2022. If rates continue to rise, the Arizona real estate market might experience a general cooling trend. However, the persistent supply deficit is projected to “outweigh” this effect, guaranteeing that the AZ housing market will stay competitive long into 2023.

Of course, there is also a great deal of uncertainty in the air. From escalating inflation to the conflict in Ukraine, several elements might affect the economy in the future. Consequently, it is difficult to make reliable projections for the Arizona real estate market or any other market in the United States.

Here's the median price of a home in some of the counties of Arizona (source: Realtor.com)

The data from Realtor.com shows the median listing home price and listing price per square foot for various counties in Arizona. Maricopa County has the highest number of homes for sale and rent, with a median listing home price of $485.3K and a listing price per square foot of $270. Coconino County has the highest median listing home price of $650K, while Cochise County has the lowest median listing home price of $279.9K. The data indicate that the housing market in Arizona is diverse and offers options for buyers with different budgets.

Counties
Median Listing
Home Price
Listing
$/SqFt
For Sale
For Rent
Maricopa County
$485.3K
$270
24,340
9,550
Pima County
$369K
$216
5,994
1,545
Yavapai County
$575K
$301
4,118
250
Pinal County
$389K
$210
6,540
856
Mohave County
$385K
$238
5,020
305
Coconino County
$650K
$373
1,035
227
Navajo County
$463.5K
$268
1,204
41
Gila County
$425K
$287
615
27
Yuma County
$299K
$196
898
100
Cochise County
$279.9K
$166
1,565
130

Arizona's housing market has over 900,000 renter households, accounting for 36% of the total number of households. According to a report from the National Low Income Housing Coalition (NLIHC), rental prices in Arizona have become out of reach for many residents. For too many low-income workers, wages have not kept pace with rising rents and home prices. Workers need to make $21.10 an hour to afford a 2-bedroom rental at a fair-market rate.

In Arizona, the Fair Market Rent (FMR) for a two-bedroom apartment is $1,097. To afford this level of rent and utilities — without paying more than 30% of income on housing — a household must earn $3,658 monthly or $43,892 annually. Assuming a 40-hour workweek, 52 weeks per year, this level of income translates into an hourly Housing Wage of $21.10.

The minimum wage in Arizona is $12.00/hr and the Average Renter Wage is $17.46. Cost-burdened is defined as spending more than 30% of one’s monthly income on housing and utilities. Neighborhoods in west and South Phoenix are the most cost-burdened. In some cases, more than 50% of households are paying 30% or more of their income on housing costs, while less than 29% of renting households are housing cost-burdened in the north.

Flagstaff MSA is the most expensive MSA where you need an hourly wage of $24.35 to afford a 2-bedroom rental. The second most expensive MSA is Phoenix-Mesa-Scottsdale, where you need an hourly wage of $22.56 to afford a 2-bedroom rental.

Arizona Housing Affordability
Source: The National Low Income Housing Coalition

Between 2010 and 2018, the City of Phoenix’s median income increased by only 10%, median rent increased by over 28%, and the median home price increased by over 57% during this time. In 2018, half of Phoenix renters were considered housing-cost burdened, 25% of homeowners were housing-cost burdened and altogether 36% of the entire population is housing-cost burdened. According to a report by Phoenix.gov, 65 % of households that fall within or below the moderate-income range would require some amount of subsidy to achieve housing that is considered affordable at their income level.

Sources:

  • https://www.zillow.com/az/home-values/
  • https://www.realtor.com/realestateandhomes-search/Arizona/overview
  • https://www.thecentersquare.com/arizona/how-arizona-s-population-will-change-in-the-next-20-years/article_86c80054-4e38-5825-b0d1-ede98be1c649.html

Colorado Housing Market: Price, Trends, Predictions 2023

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The Colorado housing market has been in a state of flux over the past few years due to the surge in demand for homes. This has led to an increase in home prices across most regions of the state, making it difficult for buyers to find their dream homes. On the other hand, it has been a seller's market, with more buyers than houses, resulting in prices being driven up.

According to the Colorado Association of Realtors, the median single-family home price in Colorado topped $500k for the first time in April of last year and has now dropped to $536,000. In February 2023, the median price in the Colorado housing market (statewide) was $536,000, down -3.4% year-over-year. This is good news for buyers who may have been priced out of the market in the past.

  • In February 2023, the median price in the Colorado housing market (statewide) was $536,000, down -3.4% year-over-year.
  • The Average Sales Price in Colorado was $663,991, down 4.4% year-over-year.
  • Percent of List Price Received has dropped to 98.5%.
  • Days on Market Until Sale = 65, up 103.1% year-over-year.
  • Closed sales of single-family homes were down by almost 19.6% from last year.
  • Months supply was up by almost 100% to 1.4 months, which is a sign that Colorado is a seller's real estate market.
  • Inventory of Active Listings increased by 59.3% year-over-year.
  • New Listings decreased by 19.6% year-over-year, which either shows a decrease in seller optimism.

The Average Sales Price in Colorado was $663,991, down 4.4% year-over-year. This drop in average sales price could be attributed to the increase in inventory of active listings, which increased by 59.3% year-over-year. More houses on the market may have resulted in a decrease in demand, leading to a drop in average sales price.

Another important metric to consider is the Percent of List Price Received, which dropped to 98.5%. This metric indicates that buyers are no longer willing to pay the asking price, and sellers may have to lower their prices to make a sale.

Days on Market Until Sale is another crucial factor to consider, and it is up by 103.1% year-over-year. This could indicate that buyers are taking longer to find the right house, or sellers are being more cautious and waiting for the right offer.

Closed sales of single-family homes were down by almost 19.6% from last year. This could be due to the increase in inventory of active listings, making buyers more selective and taking their time to find the right house.

The months supply was up by almost 100% to 1.4 months, which is a sign that Colorado is a seller's real estate market. The months supply metric is calculated by dividing the number of homes for sale by the number of homes sold in a month. A seller's market means that there are more buyers than houses for sale, and houses sell quickly.

Lastly, new listings decreased by 19.6% year-over-year, which either shows a decrease in seller optimism or a seasonal slowdown. This drop in new listings may indicate that sellers are waiting for a better time to list their homes, or there is a seasonal slowdown in the market.

In conclusion, the Colorado housing market has been a seller's market for the past few years, but the metrics indicate that it may be shifting towards a more balanced market. While home prices have increased, there has been a drop in average sales price and an increase in the inventory of active listings.

Buyers may have more options, and sellers may have to be more flexible with their prices. However, it is important to note that the real estate market is unpredictable, and these metrics can change quickly. It is crucial for buyers and sellers to stay informed and work with experienced professionals to make informed decisions.

Colorado Housing Market Predictions 2023-2024

Based on the data from the Colorado Housing Market in February 2023, it appears that the market is currently in a state of flux. While home prices have risen significantly in recent years, there are signs that the market may be cooling off. The median price of single-family homes has decreased by 3.4% year-over-year, and the average sales price has dropped by 4.4% over the same period. Additionally, the percent of list price received has dropped to 98.5%, indicating that sellers may be willing to accept lower offers.

One of the most significant changes in the market is the increase in the number of days on the market until sale. This metric has gone up by 103.1% year-over-year, suggesting that homes are taking longer to sell than they did in previous years. Another indicator of a cooling market is the decrease in closed sales of single-family homes, which were down by almost 19.6% from the previous year.

However, there are still some signs that the market remains strong for sellers. Months supply, which is a measure of the number of months it would take to sell all available homes at the current rate of sales, has increased by almost 100% to 1.4 months. This suggests that the market is still heavily tilted towards sellers, as there are not enough homes available to meet demand. Additionally, the inventory of active listings has increased by 59.3% year-over-year, indicating that there are still many homes available for sale.

Looking ahead to the rest of 2023 and into 2024, it is difficult to predict with certainty what will happen in the Colorado housing market. However, given the recent trends, it seems likely that the market will continue to cool off somewhat. Home prices may continue to decrease, and it is possible that the number of days on the market will continue to rise. At the same time, the market is still heavily tilted toward sellers, and it is likely that demand for homes will remain strong.

Based on the data provided by Zillow, we can expect a moderate increase in the Colorado housing market in 2023-2024. The average Colorado home value is currently at $530,389, up 1.8% over the past year, and homes go pending in about 29 days. Additionally, the median sale-to-list ratio for January 31, 2023, was 0.989, and 19.2% of sales were over list price, while 58.3% were under list price.

Looking at the MSA level forecast for Colorado, we can see that Denver, Boulder, and Fort Collins are expected to experience a decline in housing prices in 2023-2024, with Denver projected to decrease by 1.6% by February 2024. Other regions, such as Glenwood Springs, Steamboat Springs, and Edwards, are forecasted to experience an increase in home prices, with Edwards having the highest increase at 4.8% by February 2024.

Overall, it seems like the Colorado housing market is going to be somewhat balanced, with some regions experiencing a decrease in home values and others experiencing an increase. However, with the increase in inventory and a slight decrease in demand, buyers may have more opportunities to find homes at a more affordable price point. At the same time, sellers may need to be more flexible with their pricing strategies and be prepared to wait longer for their homes to sell.

Colorado Housing Market Predictions
Source: Zillow

Will the Colorado Housing Market Crash?

The Colorado housing market has experienced a significant surge in demand and price appreciation during the past two years, making it a challenging environment for buyers to find affordable homes. However, there are signs that the market may be slowing down, with decreased sales, increased inventory, and longer time on the market. The forecast for the next year predicts a continued slowdown in price appreciation and sales volume, but it is still expected to remain a seller's market.

One significant factor that could impact the Colorado housing market's future is the state's economy. Colorado's economy has been robust, with low unemployment rates and a thriving tech industry, attracting a large number of people to the state. However, if the economy were to take a downturn, it could lead to a decrease in demand for homes and a subsequent drop in prices. Additionally, rising interest rates could also affect the housing market, making it more expensive for buyers to obtain mortgages and leading to a decrease in demand.

While there is always a risk of a market crash, it is unlikely to happen in the current scenario. The Colorado housing market has shown resilience to economic fluctuations in the past, and its diverse economy and job growth make it less vulnerable to sudden changes. Furthermore, the state's population growth is expected to continue, which will keep the demand for homes high.

In conclusion, the Colorado housing market has been a challenging environment for buyers in recent years, with high prices and limited inventory. While the market may be slowing down, it is still a seller's market, and prices are expected to continue appreciating, albeit at a slower pace.

Factors such as the state's robust economy and population growth suggest that the housing market is unlikely to crash in the current scenario, but rising interest rates could lead to a decrease in demand and a subsequent drop in prices. Therefore, it is essential to keep an eye on economic indicators and market trends while making any real estate decisions in Colorado.

References:

  • https://www.zillow.com/co/home-values/
  • https://www.recolorado.com/buy-sell/market-trends/
  • https://fred.stlouisfed.org/series/ACTLISCOUCO#
  • https://coloradorealtors.com/market-trends/regional-and-statewide-statistics/

Housing Market 2023 Predictions | Real Estate Market Forecast

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Housing Market Predictions & Forecasts

The housing market predictions for 2023 suggest that there is little consensus among economists, mortgage firms, banks, and real estate firms about whether the historically tight U.S. housing market will reverse course. Compared to the previous year, the housing market has significantly cooled, with home sales declining and prices rising at a moderate rate. However, it is expected that a little pressure on home price growth will continue through the end of the year due to a supply-demand mismatch.

There were some predictions that the pandemic would result in a housing crash comparable to the Great Depression. That, however, will not happen. Although housing prices are unlikely to fall drastically, they are expected to rise very slowly compared to last year's pace. Despite concerns about the housing market due to the shortage of supply and rising interest rates, some factors may influence the market's pace or whether it favors buyers or sellers. Higher mortgage rates and recession fears have cooled housing markets from early spring highs.

The market is shifting away from sellers to more balanced conditions. Buyers remain interested, keeping the market somewhat competitive, especially for attractive, well-priced homes. The positive outlook is that most real estate firms do not predict a financial or foreclosure crisis on the scale of 2008, but they do expect housing fundamentals to return to the mean. Some of that moderation will be brought about by growing salaries, while some will be brought about by declining home prices. The housing market won't be overvalued after this correction is over.

It is predicted that the level of mortgage rates in 2023 will most likely influence how much home values fall. The real estate markets are significantly impacted by interest rates, which affect mortgage payments, increasing demand for real estate and driving up prices. Home prices are still rising year after year, though not as dramatically as they were earlier this year. The current housing market trends indicate buyers remain interested, keeping the market somewhat competitive, especially for attractive, well-priced homes.

ALSO READ: Housing Market Trends for January 2023

There are still many concerns regarding the housing market. Critically, despite the fact that shortage of supply has been one of the primary drivers of home price growth, rising interest rates are deterring both potential sellers and new construction. As a result, there is no hope for an improvement in the housing supply and a sustainable housing market that would result from an increase in inventory.

The large and sudden increase in mortgage rates that occurred since last year rendered an already expensive housing market far less affordable. Home prices experienced a meteoric rise in the early years of the pandemic for a number of reasons, including the fact that demand was at an all-time high, supply was at an all-time low, and mortgage rates reached a number of all-time lows.

Housing Market 2023: Predictions & Insights from Real Estate Experts

There is little consensus among economists, mortgage firms, banks, and real estate firms regarding whether the historically tight U.S. housing market will reverse course in 2023. The accounting firm KPMG LLP forecasts that the U.S. housing market would decline by as much as 20% between 2022 and 2023. Goldman Sachs and Wells Fargo estimate the market will decline by 7.5% and 5.5%, respectively. Real estate companies are not optimistic.

The real estate investment firm Amherst predicted a 5% fall in the market, while Redfin predicted a 4% decline. Even federal mortgage supporters Freddie Mac and Fannie Mae anticipate a 0% to 2% decline in the market. On the other side, the Mortgage Bankers Association anticipates a 0.7% increase in the housing market, while CoreLogic predicts a 4.1% increase. Realtor.com forecasts a 5.4% increase, the National Association of Realtors forecasts a 1.2% increase, and Home.LLC forecasts a 4% increase.

Lawrence Yun, chief economist and senior vice president of research at the National Association of Realtors, predicts that 4.78 million existing homes will be sold, prices will remain constant, and Atlanta will be the top real estate market to monitor through 2023 and beyond. Half of the country may witness minor price increases, while the other half may see minor price decreases.

Housing sales will decline by 6.8% compared to 2022 (5.13 million) and the median home price will reach $385,800 – an increase of just 0.3% from this year ($384,500). In 2023, the NAR's top 10 housing markets will include Atlanta, Raleigh, Dallas, Fayetteville, Ark., and Greenville, S.C., in addition to five new metropolitan regions.

As housing demand continues to decelerate and both buyers and sellers attempt to regain their footing, it is important to remember that the surge in housing demand in 2021 was fueled by unusual circumstances, such as COVID-19-induced demand for more space and vacation homes, as well as record-low mortgage rates.

The positive outlook is that most real estate firms do not predict a financial or foreclosure crisis on the scale of 2008, but they do expect housing fundamentals to return to the mean.  Some of that moderation will be brought about by growing salaries, while some will be brought about by declining home prices. The housing market won't be overvalued after this correction is over.

CoreLogic’s most recent Loan Performance Index shows that, despite 2022’s surge in mortgage rates, almost all borrowers were able to meet their monthly payments during the year. For the first 10 months of 2022, the number of homeowners with a mortgage who were at least 30 days late on their payments hovered between 3.4% and 2.7%, with the latest data reporting a 2.8% overall delinquency rate in October. On an annual basis, mortgage delinquencies dropped for the 19th consecutive month in October.

Foreclosure rates remained near record lows throughout most of 2022, bottoming out at 0.2% in February and remaining at 0.3% through October. The fact that 99% of borrowers have locked in a mortgage rate that is lower than current rates helps prevent most homeowners from making late payments or defaulting on them altogether.

The firm that has a bullish forecast for 2023 includes Zillow. The latest housing forecast produced by Zillow economists has U.S. home values falling just 1.1% between November 2022 and November 2023. Meanwhile, the relatively bearish camp includes firms like Moody's Analytics. Its forecast has national home prices falling 5.1% between the fourth quarter of 2022 and the fourth quarter of 2023. Among the 897 markets Zillow measured, it expects 658 markets to see falling home prices between November 2022 and November 2023.

That includes markets like San Jose (-7.2% projection); Grand Forks, N.D. (-6.7%); Odessa, Texas (-6.4%); San Francisco (-6.1%); and Santa Rosa, Calif. (-5.3%). Meanwhile, Zillow expects 239 markets to see positive or flat home price growth between November 2022 and November 2023. That includes markets like Atlantic City, N.J. (+4.2% projection); Homosassa Springs, Fla. (+4.2%), and Yuma, Ariz. (+3.7%).

According to the latest report published by Fortune, the ongoing home price correction—which saw U.S. home prices decrease 2.4% between June and October—has been moderate. However, economists and experts disagree on whether this is a modest setback for home price increases or the start of a sharper correction.

According to the forecast by Moody's Analytics, the national home prices will fall 5.1% between the fourth quarter of 2022 and the fourth quarter of 2023. Peak-to-trough, Moody's expects U.S. home prices to fall 10%. Among the 322 regional housing markets analyzed by Moody's, 178 markets are expected to see at least a 5% decline in home prices between the fourth quarter of 2022 and the fourth quarter of 2023.

That includes markets like Morristown, Tenn. (-10.3% projection), Pocatello, Idaho (-9.9%), Muskegon, Mich. (-9.7%); Boise (-9.5%), and Santa Cruz, Calif. (-8.8%). Peak-to-trough, Moody's expects U.S. home prices to fall 10%. Keep in mind when a group like Zillow or Moody's Analytics says “U.S. home prices,” they're talking about an aggregated view of the country. In regional housing markets—heck, in each neighborhood—the results could vary significantly.

Low inventories will prevent home prices from declining. Strong job growth, low inventories, and tight supply will cause unequal price movements. Lower price tiers are more susceptible to interest rate hikes, while higher price tiers are more resistant to price decreases. The mix of homes that sell may be smaller on average as the market reacts to increasing mortgage rates and decreased affordability.

Housing Price Trends & Forecast Until November 2023

CoreLogic HPI™ is designed to provide an early indication of home price trends. The CoreLogic Home Price Insights report features an interactive view of its Home Price Index product with analysis through November 2022 with forecasts through November 2023. United States home prices nationwide, including distressed sales, increased year over year by 8.6% in November 2022 compared with November 2021.

On a month-over-month basis, home prices declined by 0.2% in November 2022 compared with October 2022. The CoreLogic HPI Forecast indicates that home prices will decrease on a month-over-month basis by 0.1% from November to December 2022 and on a year-over-year basis by 2.8% from November 2022 to November 2023.

home price forecast
Source: CoreLogic

The report also shows that in November, year-over-year home price growth stopped its 21-month stretch of double-digit momentum with an 8.6% increase, the lowest rate of appreciation in precisely two years. In spite of the fact that 16 states defied the national trend and experienced double-digit yearly price rises, appreciation is slowing in many of the nation's most desirable housing areas. The Southeastern states still topped the nation in terms of price rise, but they also experienced some of the most dramatic cooling.

Comparatively, somewhat more costly Western regions have also experienced significant reductions in recent months after the spring peak. Nationwide, the recent price deceleration pushed November home values 2.5% below the spring 2022 peak. In 2023, home values will likely move even further from that high point, as CoreLogic expects price growth to begin recording negative year-over-year readings in the second quarter.

No states posted an annual decline in home prices. The states with the highest increases year over year were Florida (18%), South Carolina (13.9%), and Georgia (13.6%). These large cities continued to experience price increases in November, with Miami again on top at 21.3% year followed by Houston at 10.6%, Phoenix at 8.1%, and Las Vegas also at 7.7% year over year.

Current Home Price Trends
Source: CoreLogic

Top Markets at Risk of Home Price Decline in 2023

The CoreLogic Market Risk Indicator (MRI), a monthly update of the overall health of housing markets across the country, predicts that Bellingham, WA is at very high risk (70%-plus probability) of a decline in home prices over the next 12 months. Crestview-Fort Walton Beach-Destin, FL; Salem, OR; Merced, CA and Urban Honolulu, HI are also at very high risk for price declines.

CoreLogic Market Risk Indicators is a multi-phase regression model that provides a probability score (from 1 to 100) on the likelihood of two scenarios per metro: a >10% price reduction and a ≤ 10% price reduction. The higher the score, the higher the risk of a price reduction. CoreLogic is a leading global property information, analytics, and data-enabled solutions provider.

Top Markets at Risk of Home Price Decline in 2023
Source: CoreLogic

Housing Market Forecast & Sentiment 2023 (Freddie Mac)

According to Freddie Mac, there are currently 18 percent more persons aged 25 to 34 than there were in 2006. This represents an increase of 6.6 million prospective first-time homeowners, from 39.5 million in 2006 to 46.1 million today. In addition to the increase in first-time homebuyers, the number of high-income renters who can afford to buy and are of prime first-time homebuyer age has also been growing.

In 2006, lending criteria were significantly loosened, and little examination was done to determine whether or not a borrower could repay their loan. These days, the requirements are more stringent, which lowers the risk for both the lenders and the borrowers. Consistent with a more challenging housing market for buyers, the share of buyers that faced at least one mortgage denial before getting approved grew from 22% in 2020 to 34% in 2021.

The government and jumbo segments had the most significant tightening in the previous month. These two housing markets couldn't be more different from one another, and the current situation is in no way comparable to that of the past. The Mortgage Credit Availability Index (MCAI) is an index that is released regularly throughout the year by the Mortgage Bankers Association (MBA). This index is used to measure how simple it is to get a mortgage.

The higher the index is, the more options there are for obtaining mortgage finance. In 2004, the index was hovering around the 400 mark. As the housing market heated up, mortgage loans became more available, and then in 2006, the index surpassed 850. The mortgage credit availability index (MCAI) fell as a result of the fall in the real estate market since it became nearly hard to get mortgage financing.

Since then, thankfully, the conditions for lending have been relaxed a little bit, although the index is still relatively low. The index had a reading of 103.3 in August 2022, which is around one-seventh of what it had been in 2006. It fell by 0.1 percent to 103.3 in December. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit.

Mortgage credit availability was mostly unchanged in December as mortgage rates remained significantly higher than the prior two years and both refinance and purchase activity slowed dramatically The Conventional MCAI decreased 0.1 percent, while the Government MCAI decreased by 0.1 percent.

Of the component indices of the Conventional MCAI, the Jumbo MCAI decreased by 0.2 percent, and the Conforming MCAI was unchanged. The segment of the market which showed the sharpest decline in credit availability was FHA and VA lending –which saw a 23 percent decline over 12 months.

Mortgage Credit Availability Index Trends
Source: Mortgage Bankers Association

Over the past decade, chronic underbuilding and the influx of millions of millennials into the homebuying market have resulted in a major mismatch in housing supply and demand. Even though mortgage rates are skyrocketing, the housing market is not going to crash any time soon. The result will be a much slower rate of appreciation than in the past two years. We are predicting the housing market for the next 5 years and to recognize patterns that may influence real estate values and rentals beyond a year.

Freddie Mac's own regression research indicates that a 1 percent rise in mortgage rates reduces home price increases by around four percentage points (for example, moving from 11 percent home price growth a year to 7 percent ). In contrast, analysts at J.P. Morgan expect a greater impact of around six percentage points lower home price increase.

Since home values are so high, the housing market may be more susceptible to rate increases than in the past; therefore, the greater estimate appears realistic. While it seems apparent that rising interest rates will reduce housing demand by reducing affordability, the actual past is a significantly less reliable indicator of what will occur because of a huge balancing impact – interest rates often rise when the economy is expanding.

The government-sponsored enterprise forecasts that for every one percentage point increase in mortgage rates, house sales would decrease by around five percent, and price growth will slow by four to six percentage points. If mortgage rates stabilize at current levels, and all other factors remain constant, their analysis predicts a much slower, but still positive house price rise with a wide regional range depending on migration trends.

As work-from-home becomes increasingly popular, it is anticipated that the housing market will continue to be undersupplied and that migration to lower-cost areas will continue to rise. This is significant since most booming cities have a major housing shortage due to a previous inflow of population.

Finally, favorable demographics suggest that the robust demand for first-time homebuyers will persist. This is due to the fact that there are still a substantial number of younger renters with sufficient income to sustain homeownership, and they should continue to be a formidable force for the foreseeable future. As the economy faces various headwinds in 2023, these variables should continue to exert a substantial influence on the housing market.

Freddie Mac's Economic & Housing Research Group in its latest forecast has predicted mortgage rates dropping from an average of 6.8% in the fourth quarter of 2022 to 6.2% in the fourth quarter of 2023. The housing market rapidly decelerated last year as markets absorbed the impact of higher mortgage rates. Home sales have fallen to a forecasted 5.4 million units at a seasonally adjusted annual rate in the third quarter of 2022 from 7 million earlier this year.

Housing Market Predictions
Source: Freddie Mac

Home purchase mortgage applications point to a continued contraction in home sales activity. The government-sponsored enterprise forecasts that home sales activity will bottom at around 5 million units at the end of 2023. Falling from 7 million to 5 million would be a decline of about 30% and put the contraction in home sales in line with other historical periods when interest rates increased.

As housing market activity continues to contract, Freddie Mac expects that it will lead to a continued increase in the months’ supply of homes available for sale from historically low levels last year. The loosening of the once incredibly tight for-sale inventory removes the intense upward pressure on home prices of the past two years. While fewer sales are increasing the months’ supply, that is partially offset by fewer new listings as high mortgage rates disincentivize existing homeowners from moving up or downsizing.

They expect house prices to decline modestly, but the downside risks are elevated. As the labor market cools off, housing demand will remain weak in 2023, potentially resulting in declines in prices next year. However, home price forecast uncertainty is wide due to interest rate volatility and the potential of a recession on the horizon.

Given the house price and home sales forecast, they estimate home purchase mortgage originations to be $1.9 trillion in 2022, slowing to $1.6 trillion in 2023. With mortgage rates expected to remain elevated, they forecast refinance activity to slow with refinance originations declining from $2.8 trillion in 2021 to $747 billion in 2022 and $310 billion in 2023. Overall, their forecast is that total originations will decline from the high of $4.8 trillion in 2021 to $2.6 trillion in 2022 and $1.9 trillion in 2023.

The quarterly housing outlook pulse poll conducted by Freddie Mac assesses public attitudes on housing-related problems. In the fourth quarter of 2022, market confidence fell to its lowest point since tracking began in March 2020. The likelihood of buying or refinancing a home remained flat quarter-over-quarter, while payment concerns spiked among both homeowners and renters.

  • 34% are confident the housing market will remain strong over the next year. This is down 12 percentage points from last quarter.

  • 57% of renters and 25% of homeowners spend more than 30% of their monthly income on housing.

  • This is down 3 percentage points and up 1 percentage point, respectively, from last quarter.

  • 21% are likely to buy a home in the next six months, a 2-percentage point increase from last quarter.

  • 14% of homeowners are likely to sell in the next six months, a 1-percentage point decrease from last quarter.

  • 17% of homeowners are likely to refinance in the next six months, a 1-percentage point increase from last quarter.

  • 57% of consumers are concerned about making housing payments, with concern increasing among both renters and owners since last quarter.

  • 70% of renters (an 8-percentage point increase from last quarter) and 44% of homeowners (a 7-percentage point increase from last quarter) are concerned about making housing payments.

Housing Market Outlook
Source: Freddie Mac

Housing Market Crash Predictions For Next Few Years

The housing market is far better than it was a decade ago. Last year, the housing industry experienced a boom, with the most significant annual increase in single-family house values and rentals, historically low foreclosure rates, and the highest number of home sales in 15 years, totaling 6.9 million for the entire year. Over the previous two years, national home prices increased by 33%.

The market was driven by record-low borrowing rates in 2020 and 2021, as well as a supply constraint due to underbuilding. The enormous demand from first-time buyers is almost as important as the limited new supply. The current housing market is also being driven by exceptionally favorable age demographic trends.

The overarching concern is whether or not the housing market will crash, and if so, when. The simple answer is that it will not crash anytime soon and we certainly don't see a housing market crash coming in 2023. Rising rates are cooling the market as some expected but the prices are still rising at a slower rate. The current trends and the forecast for the next 12 to 24 months clearly show that most likely the housing market is expected to see a positive home price appreciation.

In recent years, the price of homes has climbed dramatically. Many prospective buyers, especially those with limited financial resources, are eager to hear whether and when home prices will become more accessible. Here is when housing market prices are going to crash. While this may appear to be an oversimplification, this is how markets operate.

When demand is satisfied, prices fall. In many housing markets, there is an extreme demand for properties at the moment, and there simply aren't enough homes to sell to prospective buyers. Home construction has been increasing in recent years, but they are so far behind catching up. Thus, to see significant declines in home prices, we would need to see significant declines in buyer demand.

Demand declines primarily as a result of rising interest rates or a slowing economy in general. Ultimately, for rising interest rates to destroy home values, we'd need substantially less demand and far more housing supply than we presently have. Even if price growth moderates this year, it is extremely improbable that home prices will crash. Thus, there will be no crash in home prices; rather, there will be a pullback, which is normal for any asset class. The home price growth in the United States is forecasted to just “moderate” in 2023.

Affordability will be a concern for many, as home prices will continue to rise, if at a slower pace than the previous year. With 10 years having now passed since the Great Recession, the U.S. has been in the longest period of continued economic expansion on record. The housing market has been along for much of the ride and continues to benefit greatly from the overall health of the economy.

However, hot economies eventually cool and with that, hot housing markets move more toward balance. Housing market forecasts are essentially informed guesses based on existing patterns. While the real estate pace of last year appears to be reverting to seasonality as we enter 2023, demand is not waning.

Increasing interest rates will almost certainly have a greater impact on the national housing market in 2023 than any other factor. While sellers remain in an advantageous position, price stability and the continuation of competitive interest rates may provide some much-needed relief to buyers this year. Housing supply is and will likely remain a challenge for some time as labor and material shortages, as well as general supply chain issues, delay new construction.

The latest housing market trends show that prices are rising in most parts of the country and most price segments because of the lack of supply. Economic activities are ramping up in all sectors, mortgage rates are rising, and jobs are also recovering. The housing market remains largely a moderate seller's market due to demand still outpacing supply. The inventory of available houses continues to be a constraint on both buyers and sellers.

Forecasting home price appreciation is a challenging task. While inventory has increased slightly, it remains significantly below pre-pandemic levels and is simply unable to meet current demand. Tight supply following years of underbuilding, combined with increased demand due to remote work, and US demographics — will continue to be a factor in 2023. It will continue to be a moderate or balanced real estate market in 2023 & 2024.

References

  • https://www.realtor.com/research/
  • https://www.realtor.com/research/blog/
  • https://www.bankrate.com/mortgages/mortgage-rates/
  • https://www.blackknightinc.com/
  • https://www.freddiemac.com/research/forecast
  • https://www.yahoo.com/video/moody-home-prices-crash-20-142931780.html
  • https://www.realtor.com/research/2022-national-housing-forecast-midyear-update/
  • https://www.nar.realtor/research-and-statistics/housing-statistics/
  • https://www.corelogic.com/intelligence/u-s-home-price-insights/
  • https://www.zillow.com/research/daily-market-pulse-26666/
  • https://www.fhfa.gov/DataTools/Downloads/Pages/House-Price-Index.aspx
  • https://www.realtor.com/research/2021-national-housing-forecast/
  • https://www.investopedia.com/personal-finance/how-millennials-are-changing-housing-market
  • https://www.freddiemac.com/research/consumer-research/20221220-housing-sentiment-fourth-quarter-2022

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