Housing Market Forecast Archives

Canada Housing Market Forecast: Will Prices Drop in 2023?

May 30, 2023 by Marco Santarelli

The Canadian housing market has been experiencing a downturn since March 2022, and the question on everyone’s mind is when will it reach its bottom? However, after a significant decline in the housing market last year, Canada’s housing market appears to be on the road to recovery. The average home price has increased by 8% compared to last month, reaching $662,437, the highest level since June 2022, and all provinces saw their provincial average home price increase compared to last month, according to the data released by the Canadian Real Estate Association (CREA).

However, the national average home price is still down by 19% year-over-year due to the impact of higher Canadian interest rates seen over the past year. Sales during February 2023 are down 40% year-over-year, but there was an increase of 41.6% from last month when Canadian home sales were at a 14-year low.

Canada’s MLS Benchmark Price, which measures the price of a “typical” home in Canada, has increased by 0.2% from last month, reaching $715,400. This is the first time the benchmark price has increased on a monthly basis since March 2022. The rise in home prices and benchmark price may be a sign of the housing market’s recovery, but it’s still too early to tell.

ALSO READ: US Housing Market Predictions

Canada Housing Market Trends & Stats for 2023

The recent report released by the Canadian Real Estate Association (CREA) shows that national home sales were up on a month-over-month basis in February 2023. The Canadian housing market is showing signs of recovery in February 2023, with sales increasing on a month-over-month basis, the market tightening and month-over-month price declines getting smaller. Future sellers are likely biding their time until the optimum time to list and buy something else, which is typically in the spring. With new listings falling considerably and sales moving higher, the market may shift toward a seller's market.

Key Points from the Canadian Housing Report

National home sales rose 2.3% month-over-month in February.
Actual (not seasonally adjusted) monthly activity came in 40% below February 2022.
The number of newly listed properties dropped 7.9% month-over-month.
The MLS® Home Price Index (HPI) edged down 1.1% month-over-month and was down 15.8% year-over-year.
The actual (not seasonally adjusted) national average sale price posted an 18.9% year-over-year decline in February.

According to the Canadian Real Estate Association (CREA), home sales in Canada increased by 2.3% from January to February 2023, with the Greater Toronto Area (GTA) and Greater Vancouver leading the gains. The actual number of transactions in February 2023 was 40% lower than the same month in 2022, comparable to the numbers seen in 2018 and 2019. The market is showing signs of recovery and the potential for a more robust market in the spring, with homeowners preparing to list their properties and buyers getting mortgage pre-approvals.

New Listings:

The number of newly listed homes fell by 7.9% in February, led by double-digit declines in several large markets, particularly in Ontario. Future sellers are likely waiting for the optimal time to list and buy something else, which is typically in the spring. With new listings falling considerably and sales moving higher, the sales-to-new listings ratio jumped to 58.4%, the tightest since last April.

Inventory:

There were 4.1 months of inventory on a national basis at the end of February 2023, down from 4.2 months at the end of January, indicating the market is tightening. It is also a full month below its long-term average, indicating the potential for a seller's market. The number of months of inventory is calculated by dividing the number of active listings at the end of the month by the number of sales during that month.

Home Prices:

The Aggregate Composite MLS® Home Price Index (HPI) was down 1.1% on a month-over-month basis in February 2023, only about half the decline recorded the month before and the smallest month-over-month drop since last March. The Aggregate Composite MLS® HPI is now 15.8% below its peak level, reached in February 2022. Prices are down from peak levels by more than they are nationally in most parts of Ontario and a few parts of British Columbia, and down by less elsewhere. While prices have softened to some degree almost everywhere, Calgary, Regina, Saskatoon, and St. John’s stand out as markets where home prices are barely off their peaks.

National Average Home Price:

The actual (not seasonally adjusted) national average home price was $662,437 in February 2023, down 18.9% from the all-time record in February 2022 but up more than $50,000 from its January level resulting from outsized sales increases in the GTA and Greater Vancouver, two of Canada’s most active and expensive housing markets. Excluding these two markets from the calculation cut almost $135,000 from the national average price in February 2023.

Canada Housing Market Forecast: Will it Crash or Not?

The Canadian housing market has been a hot topic lately, with many wondering if it will crash or not. Here's what we predict will happen. The question on everyone’s mind is when will it reach its bottom? According to RBC’s recent economic analysis, the bottom is predicted to happen in Spring 2023. However, this does not mean that the housing correction has run its course. RBC is forecasting a peak-to-trough decline of 15% in home prices across the country, with about half of this decline still to come.

Ontario, British Columbia, and Alberta will experience a peak-to-trough dip of 19%, 16%, and 6%, respectively. It is important to note that this decline only offsets some of the immense home price gains between late 2020 and February 2022. RBC states that “the dramatic swing in the market since March 2022 is a cyclical event marking the transition out of highly unusual circumstances—a global pandemic and exceptionally low-interest rates. Structurally the market is sound.”

Canada Housing Market Forecast — **Source: RBC**

The slowdown in home sales nationwide has significantly moderated since the Fall of 2022, mainly because housing activity is already deeply depressed in most markets. This leaves little remaining downside, except for a major economic recession. The housing market recovery will slowly begin later in 2023, especially with affordability issues and the weakened economy holding back prospective homebuyers. The pace of recovery will gradually pick up in 2024 when the economy stabilizes, market inflation softens, and the Bank of Canada begins to trim down its key interest rate imposed in March 2022.

Impact on Buyers and Sellers For buyers, the forecast means that it may be a good time to purchase a home if they have the financial means to do so. With the decline in home prices, buyers will have the opportunity to purchase a home at a more affordable price. However, buyers need to consider their financial situation and whether they can handle the potential increase in mortgage rates when the Bank of Canada begins to trim down its key interest rate in 2024.

For sellers, the forecast means that they may need to adjust their expectations for their home’s selling price. With the decline in home prices, sellers may need to lower their asking price to attract buyers. It is also important to note that the housing market recovery will be slow, and sellers may need to be patient and flexible with their selling strategy.

Here are more insights from the report:

Activity is Quiet, But the Bottom is Near

Home resales have been declining since the market frenzy of 2020, but we believe the market is hitting bottom this spring. Resales are the quietest they've been in years, and we expect a bottom to form in the coming months. While some markets may recover faster than others, the primary reason for the slowdown is the lack of activity, and unless the economy dives, there's little downside left.

Interest Rates are Stabilizing, But Won't Prop Up the Market

The Bank of Canada's rate hiking cycle is on hold, and we don't expect any rate cuts until 2024. This should help stabilize the market, but won't be enough to prop it up. Any downward drift in longer-term bond yields over the next year will be viewed as a positive sign of a turnaround, but the interest rate environment will remain restrictive for a while.

Prices are Expected to Drop Further in the Near Term

Home prices will continue to decline in the coming months, with the national RPS HPI likely to fall another 8% by the third quarter from fourth-quarter levels. Markets in B.C. and Ontario still face the biggest downside risk, with peak-to-trough price forecasts ranging from -19% in Ontario to -5% in Newfoundland and Labrador. Buyers will continue to face affordability challenges, especially in expensive markets like B.C. and Ontario. This means a quick market rebound is unlikely, and affordability issues will stand in the way of a material easing in buyers' budget constraints.

Solid Market Fundamentals Despite the Correction

The market correction since March 2022 is a cyclical event marking the transition out of highly unusual circumstances like a global pandemic and exceptionally low-interest rates. However, structurally the market is sound. Inventories are still historically low, and Canada's population growth is the highest in generations. Booming immigration will continue to fuel demand through the medium term and beyond.

Homebuilding is Key to Long-Term Balance

The recent track record for construction has been underwhelming, and homebuilding needs to ramp up considerably to accommodate the growth in households and address the housing affordability crisis in many Canadian cities. We estimate that at least 270,000 units must be built per year by 2025, but it's unclear whether the construction industry has the capacity to do so in the face of significant labor shortages.

Canadian Provincial Housing Predictions

On a lighter note, the Canadian housing market, much like the human body, has experienced a correction from its pandemic highs. It has been a tough year for the market, but there is a glimmer of hope on the horizon. With falling interest rates, a tight labor market, elevated household savings and heightened immigration, experts expect the market to find a bottom by the end of this year. It's like a phoenix rising from the ashes, ready to take flight once again.

A new report from Desjardins‘ economics team says that the Canadian housing market has experienced a significant correction from its peak during the pandemic. Existing home sales have dropped by over 38% from their peak in February 2022, and new listings have also decreased by almost 20% over the same period. The average home price has fallen by nearly 20%, while the benchmark home price, which adjusts for market composition, has decreased by approximately 14%.

This decline in sales, but relatively steady listings, has moved the national housing market into a more balanced territory compared to the start of last year when it leaned significantly in favor of sellers. Looking ahead, they predict that the Canadian housing market will hit its bottom by the end of the year. The Bank of Canada's recent pivot suggests that the central bank is likely to remain on hold for the foreseeable future and may even begin cutting rates before the year is out.

However, high-interest rates will continue to affect housing market activity, while the effects of previous rate hikes have yet to be fully felt in the economy. The Canadian housing market's correction may have a significant impact on Canadians, including a potential recession in 2023. Despite this, experts remain optimistic that the housing market will eventually recover.

While the national housing market is important, it's important to note that all real estate is local. Each province has its unique economic developments, and this can lead to widely varying outcomes in the housing market. For example, Ontario, Canada's most populous province, has borne the brunt of the housing market correction so far. However, it continues to attract immigrants, which should help underpin the residential real estate rebound as interest rates continue to decline.

British Columbia, which also relies heavily on the real estate sector, finds itself in a similar situation to Ontario. However, it too continues to welcome large numbers of newcomers, which should help drive the residential real estate rebound.

Quebec, on the other hand, is expected to continue to deteriorate in the coming months. Despite resumed immigration after the pandemic hiatus, it hasn't been enough to spur new construction due to high-interest rates, leaving developers struggling to turn a profit.

One of the biggest surprises of 2022 was the resiliency of the housing markets of the Maritime provinces. Despite seeing the largest run-up in prices in Canada during the pandemic, prices have yet to adjust as much as they have in Central Canada or British Columbia. However, we may be seeing the early stages of a reversal in that trend, as a push from pandemic-related migration has now subsided.

The Prairie provinces, on the other hand, are expected to be at the top of the growth leaderboard in 2023. Commodity-driven growth is characterizing their outlook, with high commodity prices and an influx of newcomers to Canada and Canadians from other provinces looking for employment opportunities and more affordable housing options.

Overall, Canada's housing market is on the path to recovery. We expect sales activity to gradually grind lower through 2023 before rebounding in the second half of the year and into 2024. Falling borrowing costs and support from elevated levels of immigration should help drive the market forward. While each province has its unique outlook, the housing market as a whole is set to soar once again.

More Topics For Reading:

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

Where Are Housing Prices Falling in 2022?

Is it a Good Time to Buy a House or Should Wait Until 2024

Housing Affordability Crisis is Increasing in the United States

The Hottest Real Estate Markets of 2022

This article shouldn't be used to make real estate or financial decisions. Some of this article's information came from referenced websites. Norada Real Estate Investments provides no express or implied claims, warranties, or guarantees that the material is accurate, reliable, or current. All information should be validated using the below references. Norada Real Estate Investments does not predict the future Canadian housing market. Buying a property needs research, planning, and budgeting. Not all investments are good. Always do research and consult a real estate investment counselor.

Sources:

https://stats.crea.ca/en-CA/
https://wowa.ca/reports/canada-housing-market
https://www.desjardins.com/qc/en/savings-investment/economic-studies/canadian-residential-real-estate-february-9-2023.html#

Will Home Prices Drop in 2023: Housing Market Predictions 2023

May 29, 2023 by Marco Santarelli

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.

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.

Zillow, the leading online real estate company, released its latest home value and sales forecast in May 2023. This forecast reflects the current state of the housing market and provides valuable insights for home buyers, sellers, and investors. Let's delve into the key findings of Zillow's May 2023 forecast.

Home Value Growth Projection: A Positive Outlook

Zillow's forecast reveals a positive outlook for home values in 2023. The company expects a significant increase in home values compared to the previous month's forecast. Specifically, Zillow projects that home values will grow by 3.9% in 2023, indicating a considerable surge. This revision suggests that the market is experiencing stronger growth potential than previously anticipated. The accelerated monthly home value growth in April, which aligns with pre-pandemic expectations, has played a crucial role in boosting Zillow's forecast.

Mortgage Rates: A Key Driver of Housing Affordability

Mortgage rates play a pivotal role in determining the affordability of homes for prospective buyers. Zillow's long-term expectation for mortgage rates has undergone a downward revision, which could have a positive impact on housing affordability. Lower mortgage rates would enable more buyers to enter the market, driving housing demand and potentially putting upward pressure on home values. However, it's important to note that the looming threat of a debt default could have adverse effects, causing mortgage rates to soar unless a resolution is reached.

Inventory Forecast: A Tighter Market

The availability of housing inventory is a critical factor in the overall dynamics of the real estate market. Zillow's latest forecast predicts a lower inventory of homes for sale compared to previous projections. The combination of increased affordability due to lower mortgage rates and tighter inventory conditions is expected to exert upward pressure on home values. This forecast adjustment suggests that the market is becoming more competitive for buyers due to limited supply, potentially leading to higher prices.

Existing Home Sales: An Adjusted Projection

Zillow's forecast for existing home sales in 2023 remains relatively stable compared to the previous month's estimate. The company has made a slight upward revision, projecting 4.36 million existing home sales for the year. However, it's important to note that this figure represents a 13% decline compared to the number of sales recorded in 2022. The expectation of lower mortgage rates, which stimulates demand, is partially offset by the lower projection for housing inventory. Consequently, the housing market is anticipated to experience a moderate decrease in sales volume compared to the previous year.

Top 5 Metros Where House Prices Will Drop Most by April 2024

Some regional markets are projected to see home price declines. In their latest forecast, they now predict that home values will fall only in 42 of the nation's 895 regional housing markets between April 2023 and April 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
Hobbs, NM	-5.6%
Houma, LA	-5.0%
Lake Charles, LA	-4.5%
Alice, TX	-4.3%
Lamesa, TX	-3.9%

Top 5 Metros Where House Prices Will Increase Most by April 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, 853 markets are predicted to see rising house prices over the next twelve months ending with April 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 15.9%.

Metro Area	Change in Values
Murray, KY	+15.9%
Atchison, KS	+15.3%
Parsons, KS	+13.3%
Maryville, MO	+12.9%
Mountain Home, ID	+12.1%

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? According to recent weekly data from Realtor.com, despite the advantages for buyers in today's housing market, where inventory remains scarce, a significant number of existing homeowners are choosing not to sell. Consequently, new listings continue to fall behind the levels seen a year ago, resulting in a slow-moving housing market.

However, the pressure on home prices has alleviated due to high mortgage rates, with asking prices increasing by less than one percent compared to the previous year. Recent trends suggest that home prices may dip below year-ago levels in the coming weeks. While this may be good news for homebuyers seeking lower prices, the impact could be mitigated by higher mortgage rates, potentially erasing any potential savings.

Median Listing Price Growth

The median listing price grew by just 0.7% compared to the previous year. After a pause in late April, home price growth eased in mid-May. While the national trend provides a broad context, it's crucial to consider local market trends for making individual decisions. Data indicates that these trends vary across different regions.

In the Northeast, for example, median home listing prices remained up by double digits compared to one year ago, while the South and West saw single-digit increases. The relative affordability of markets in the Northeast and Midwest continues to attract buyers, as highlighted in the April 2023 Hottest Markets report.

New Listings

New listings, which indicate the number of homes put up for sale, were down by 26% compared to the previous year. This decline in new listings has persisted for 46 consecutive weeks, with this week's data matching last week's drop. The reluctance of existing homeowners to sell can be attributed to the fact that many of them hold mortgages with rates significantly lower than the current market rates.

Notably, investors, who were not major contributors to the housing market as sellers since the mid-2000s (except for the early stages of the pandemic), have seen their buying activity decline faster than their selling activity since the second half of 2022. If this trend continues into 2023, investors may contribute more new listings to the market as sellers.

Active Inventory Growth

The growth of active inventory has slowed down, with the number of homes for sale increasing by just 20% compared to the previous year. While the inventory level is higher than last year, the rate of growth has diminished compared to recent weeks. As discussed previously, further slowing of inventory growth is expected. This has led some home shoppers to consider newly built homes, as existing home sales have declined in recent months. Buyers, facing limited inventory, see new construction as a viable alternative.

Time on Market

Homes spent 15 additional days on the market compared to the same period last year. For the past 44 weeks, it has taken longer to sell a home compared to the corresponding week of the previous year. This gap has exceeded two weeks since January. However, April housing data revealed that homes were on the market for just 49 days, which is faster than any pre-pandemic month since Realtor.com's data history began in 2017.

The market has certainly slowed down from the frenzied pace seen when mortgage rates were at record lows. Nevertheless, homes continue to spend fewer days on the market than was typical before the frenzy, indicating an ongoing imbalance of supply and demand resulting from a decade of underbuilding.

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 March 2023 and forecasts up to March 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.

Home Price Trends

In March 2023, home prices nationwide, including distressed sales, experienced a year-over-year increase of 3.1% compared to March 2022. On a month-over-month basis, home prices rose by 1.6% from February 2023. It is important to note that these figures are revised with public records data to ensure accuracy.

Home Price Forecast

According to the CoreLogic HPI Forecast, home prices are projected to continue their upward trajectory. The forecast indicates an expected month-over-month increase of 0.8% from March 2023 to April 2023 and a year-over-year increase of 4.6% from March 2023 to March 2024.

Slower Year-Over-Year Growth

Despite the overall positive trend, the year-over-year home price growth in March 2023 slowed to its lowest rate since 2012. The growth rate fell to 3.1%, reflecting a decline from the previous year in 10 states, primarily in the Western region. This slowdown can be attributed to factors such as affordability issues, inventory shortages, and a shift in demand from higher-priced homes to median-priced homes.

Factors Affecting the Market

Several factors are contributing to the hesitancy of potential homebuyers. Inflation concerns, slowing job gains and wage growth, the potential for a recession, and elevated interest rates are causing some buyers to be cautious. The market is likely to experience a decline in annual home price growth during the spring and early summer months, with a potential rebound later in 2023.

Regional Variations

Home price trends vary across different regions of the United States. Some large metros have shown signs of improvement, with two consecutive months of monthly gains. The lack of inventory in the housing market and the impact of remote working conditions on mobility are contributing to these price increases in certain areas.

State-Level Insights

When analyzing home price changes at the state level, some interesting trends emerge. In March 2023, Arizona, California, Colorado, Idaho, Montana, Nevada, New York, Oregon, Utah, and Washington experienced annual declines in home prices. On the other hand, Vermont, Indiana, and Florida saw the highest year-over-year increases in home prices, with growth rates of 9.9%, 9.2%, and 8.9%, respectively.

Top Markets at Risk of Home Price Decline in 2023: Analysis and Forecast

The CoreLogic Market Risk Indicator (MRI) provides valuable insights into the health and stability of housing markets across the United States. By analyzing various factors and economic data, the MRI can assess the probability of a price decline in different metropolitan areas. Let's take a closer look at some of the top markets at risk of a home price decline in 2023, according to the MRI.

Provo-Orem, UT: Provo-Orem, located in Utah, stands out as a metropolitan area with a very high probability of a price decline within the next 12 months.

Boise City, ID: Boise City, the capital of Idaho, is also identified as a metropolitan area at a very high risk of experiencing a decline in home prices. Despite being a vibrant and growing region, Boise City faces potential challenges that may impact its housing market.

Lakeland-Winter Haven, FL: Located in Central Florida, the Lakeland-Winter Haven metropolitan area is another region at a very high risk of a price decline. While Florida's real estate market has seen significant growth and demand in recent years, this particular area faces unique circumstances that contribute to the potential for price declines.

Salt Lake City, UT: Salt Lake City, the capital of Utah, is known for its stunning natural surroundings and robust economy. However, the MRI suggests that Salt Lake City is also at a very high risk of experiencing a decline in home prices. This risk may be attributed to factors such as rising interest rates.

Ogden-Clearfield, UT: Ogden-Clearfield, another metropolitan area in Utah, is identified as being at a very high risk of a price decline. Similar to other regions, Ogden-Clearfield may face challenges related to affordability, supply and demand imbalances, or economic fluctuations.

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

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.”

Will Home Prices Drop — **Source: FHFA**

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).

Metropolitan Areas

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.

Census Divisions

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 of 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.

It's important to remember that the housing market is influenced by a multitude of factors, and predictions are subject to change as conditions evolve. Keeping track of market indicators and staying informed about economic trends can help buyers, sellers, and industry professionals make well-informed decisions.

As the US housing market moves forward in 2023, it will be interesting to see how the various factors impacting home prices unfold. The balance between supply and demand, affordability concerns, economic conditions, and policy changes will continue to shape the trajectory of home prices nationwide.

Whether you're a potential homebuyer, seller, or industry observer, staying informed about the latest trends and forecasts can provide valuable insights into the US housing market. By understanding these dynamics, you can navigate the market more effectively and make informed decisions that align with your goals and aspirations.

Sources:

https://www.zillow.com/research/data/
https://www.fhfa.gov/AboutUs/reportsplans/Pages/FHFA-Reports.aspx
https://www.noradarealestate.com/blog/housing-market-predictions/
https://www.forbes.com/advisor/mortgages/real-estate/housing-market-predictions/
https://www.zillow.com/resources/stay-informed/housing-market-predictions-2023/
https://www.corelogic.com/intelligence/u-s-home-price-insights-march-2023/
https://realestate.usnews.com/real-estate/housing-market-index/articles/housing-market-predictions-for-the-next-5-years
https://www.spglobal.com/spdji/en/indices/indicators/sp-corelogic-case-shiller-us-national-home-price-nsa-index/
https://www.nar.realtor/newsroom/baby-boomers-overtake-millennials-as-largest-generation-of-home-buyers

Colorado Housing Market: Price, Trends, Predictions 2023

May 21, 2023 by Marco Santarelli

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.

The Colorado housing market has seen some notable changes in April 2023. From shifts in median and average prices to changes in sales and inventory, the market is experiencing fluctuations that can have a significant impact on buyers and sellers. Let's delve into the details and explore the key findings from the latest housing report released by the Colorado Association of Realtors.

The median single-family home price in Colorado reached $600k for the first time in April of last year and has now dropped to $565,000. In April 2023, the median price in the Colorado housing market (statewide) was $565,000, down -5.8% year-over-year. This is good news for buyers who may have been priced out of the market in the past. Here's the data for all properties including SFH and Condos.

In April 2023, the median price in the Colorado housing market (statewide) was $530,000, down -4.5% 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 99.6%.
Average Days on Market Until Sale = 46, up 100% year-over-year.
Closed sales were down by almost 27.5% from last year.
Pending sales were down by 15.9% from last year.
Months supply was up by almost 54.5% to 1.7 months, which is a sign that Colorado is a seller's real estate market.
New Listings decreased by 27.5% year-over-year, which either shows a decrease in seller optimism.

The April 2023 housing report for Colorado reveals a changing landscape in the real estate market. While median and average prices experienced a decline, the increase in average days on market and months supply of inventory indicates a market that is shifting in favor of buyers. Closed and pending sales also saw significant decreases, suggesting a decrease in market activity.

As new listings decreased, sellers may be adjusting their strategies in response to market conditions. Closed sales experienced a decline of nearly 27.5% from the previous year, indicating a decrease in the number of successfully completed transactions. Additionally, pending sales were down by 15.9% compared to April 2022, suggesting a slowdown in the market's activity and a possible decrease in buyer demand.

Colorado Housing Market Predictions 2023-2024

The Colorado housing market has experienced notable shifts in April 2023, as reflected in the recent housing report. Now, let's delve into the forecast for the future, considering the data and trends observed, to provide insights for buyers and sellers in Colorado.

Price Expectations:

Based on the data from April 2023, where the median price in Colorado decreased by -4.5% year-over-year, and the average sales price declined by 4.4%, it indicates a potential opportunity for buyers to enter the market at more favorable price points. However, it's important to note that real estate prices can be influenced by various factors, including economic conditions and market trends.

Supply and Demand Dynamics:

The months supply of inventory increased by approximately 54.5% to 1.7 months in April 2023. This suggests a market that favors buyers, as the supply of homes exceeds current demand. However, it's essential to monitor supply and demand dynamics closely, as market conditions can change over time.

Sales and New Listings:

The housing report indicated a decline in closed sales by nearly 27.5% and a decrease in new listings by 27.5% year-over-year. This suggests a potential slowdown in market activity. While sellers may adjust their strategies and expectations, buyers may have fewer options to choose from. Monitoring the market for any shifts in sales and new listings is crucial for understanding future trends.

Based on the data and trends observed in April 2023, the Colorado housing market forecast suggests a market that presents opportunities for buyers. The decline in median and average prices, along with increased days on market and inventory supply, may provide favorable conditions for those looking to enter the market. However, it's essential to remain vigilant and adapt to changing market dynamics.

Colorado MSAs Housing Market Forecast: A Closer Look at Regional Outlooks

As we explore the housing market forecast for Colorado, it's crucial to understand how different Metropolitan Statistical Areas (MSAs) within the state may perform. The following data by Zillow provides insights into the forecasted trends for various Colorado MSAs, offering a glimpse into potential opportunities and challenges within each region.

Denver, CO MSA:

In the Denver MSA, the forecast indicates a relatively stable market, with minor fluctuations in prices. While there is no significant change projected for May 2023, a slight decrease of -0.1% is anticipated by July 2023. However, the market is expected to rebound, showing growth of 1.8% by April 2024.

Colorado Springs, CO MSA:

The forecast for the Colorado Springs MSA demonstrates consistent growth. Prices are expected to remain steady in May 2023, followed by a modest increase of 0.1% by July 2023. The market is projected to experience substantial growth, with a forecasted rise of 3.1% by April 2024.

Fort Collins, CO MSA:

The Fort Collins MSA is poised for a positive market performance. A modest increase of 0.5% is anticipated by May 2023, followed by continued growth of 0.8% by July 2023 and 2.9% by April 2024. These figures suggest a favorable market for both buyers and sellers.

Boulder, CO MSA:

The Boulder MSA is projected to experience minor fluctuations in prices. No significant change is expected in May 2023, with a slight decrease of -0.3% by July 2023. However, the market is forecasted to rebound with a 1.1% increase by April 2024.

Greeley, CO MSA:

In the Greeley MSA, a steady upward trend is expected. Prices are forecasted to increase by 0.5% in May 2023, followed by additional growth of 0.8% by July 2023 and 3.5% by April 2024. These positive trends suggest a robust market for the region.

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/

Real Estate Housing Market Predictions & Forecast 2023

May 15, 2023 by Marco Santarelli

Experts are divided into the housing market predictions and forecasts for 2023. While there is no consensus on whether the historically tight housing market will loosen or not, the market has cooled significantly from its previous highs. Despite predictions of a housing market crash comparable to the Great Depression due to the pandemic, the market has remained stable. However, home prices are forecasted to continue rising at a slower rate, while home sales may continue to decline due to supply-demand imbalances.

While higher mortgage rates and recession fears have cooled the market from its spring highs, other factors may impact the market's pace and favorability for buyers or sellers. 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.

ALSO READ: Real Estate Housing Market Trends for February 2023

The direction of mortgage rates in 2023 is likely to affect the decline in home values. Interest rates have a significant impact on the real estate market, as they influence mortgage payments, demand for housing, and housing prices. While home prices are still on the rise, the rate of growth has slowed down from earlier in the year. Despite this, buyers remain interested in the market, resulting in a somewhat competitive market, especially for well-priced and attractive homes.

However, there are still many concerns regarding the housing market, particularly regarding the shortage of supply and rising interest rates. The shortage of supply has been one of the main drivers of home price growth, but rising interest rates are discouraging potential sellers and new construction. This means that there is little hope for improvement in the housing supply and a sustainable housing market that would result from an increase in inventory.

The significant increase in mortgage rates since last year has made the already expensive housing market even less affordable. Home prices experienced a meteoric rise during the pandemic due to factors such as high demand, low supply, and record-low mortgage rates. However, the sudden increase in mortgage rates has dampened the market's growth and affordability, making it difficult for buyers to enter the market. Let us continue to find out about the latest housing market predictions and forecasts.

Real Estate Housing Market Predictions By Experts for 2023

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. It appears that the US housing market is likely to experience a decline in home prices in 2023. However, the severity of this decline will likely depend on various factors, including the extent of the housing supply shortage, economic conditions, and location-specific factors. Let's take a detailed look at some of the notable predictions made by top companies in the industry.

Company	Optimistic/Pessimistic Market Predictions
Fannie Mae	Pessimistic
National Association of Realtors (NAR)	Optimistic
Goldman Sachs	Pessimistic
Wells Fargo	Pessimistic
KPMG LLP	Pessimistic
Freddie Mac	Mixed
CoreLogic	Mixed

According to Fannie Mae, it appears that the U.S. housing market will continue to struggle in 2023. The organization expects both new and existing home sales volumes to drop by 5.4% and 19.2%, respectively, after significant drops in 2022. This will likely occur due to high mortgage rates, which Fannie Mae believes will continue to deter potential buyers. Furthermore, the number of available homes on the market will remain low, as most homeowners with low fixed mortgage rates will not want to trade them in for higher rates, thereby limiting inventory levels.

Fannie Mae also expects home prices to continue to decline in 2023 and 2024. Following a 2.5% drop in the second half of 2022, the organization predicts a further 4.2% decline in 2023 and a 2.3% decline in 2024. However, this correction is considered mild, as national home prices are still projected to be up 29% by the end of 2024 compared to March 2020 levels. It is important to note that regional variations may occur in price movements despite national price trends.

According to the National Association of Realtors (NAR), home prices are expected to increase by 1.2% this year. This projection indicates a continued upward trend in the housing market. Additionally, NAR predicts that mortgage rates will plateau at about 6.4%.

Goldman Sachs and Wells Fargo have both recently made forecasts for the US housing market in 2023, and their predictions suggest a decline in home prices. Goldman Sachs is forecasting a more significant drop, with a projected decline of 7.6% from the peak, while Wells Fargo predicts a more modest decrease of 5.5%. Both banks attribute the anticipated drop to the current housing supply shortage, which has been a persistent issue in recent years.

It's worth noting that Wells Fargo also highlighted that there may be significant discrepancies in the extent of the price fluctuations depending on the desirability of a particular location. This could mean that some areas may experience larger price drops than others, depending on factors such as local economic conditions, population growth, and housing supply and demand dynamics.

The accounting firm KPMG LLP's forecast for the housing market in 2023 looks bleak. Existing home sales are predicted to drop by 23% from 2022, which would be a decrease not seen since 2007. The drop is expected to be driven by single-family home sales due to the limited supply and high prices. However, condos are predicted to fare better.

The number of purchase applications has dropped by over 40% from a year ago in February. Buyers are betting on rate cuts by the Fed as their mortgages reset in 2024, and they are using adjustable-rate mortgages (ARMs) to get into the few homes that are listed. Despite the spike in rates and erosion in affordability, millennials still make up over half of the purchase applications.

The share of those who have locked into ultra-low rates or paid off their mortgages has surged. Those homeowners have a natural hedge against escalating shelter costs and some have chosen to rent out their homes to cash in on the demand for single-family rentals, further constraining the stock of homes.

Home prices are predicted to fall between 7% and 10% depending on the measure, with the S&P CoreLogic Case-Shiller Home Price Index expected to drop another 8% in 2023, bringing prices to the still elevated levels of late 2021. Despite the rise in demand for rentals, rents have fallen more rapidly than home prices, and the Fed is counting on those declines to cool inflation. However, the tight labor market may place a floor under how much rents fall in the hottest markets, hence the Fed's focus on the labor market.

According to Freddie Mac's first-quarter housing outlook pulse survey of 2023, market confidence in the housing market has rebounded somewhat quarter-over-quarter, despite payment concerns remaining unchanged among both homeowners and renters. Specifically, 43% of respondents are confident the housing market will remain strong over the next year, up 9 percentage points from last quarter but down 15 percentage points compared to last year.

However, concerns about housing affordability persist, with 59% of renters and 28% of homeowners spending more than 30% of their monthly income on housing. Additionally, over half of the respondents (54%) expressed concerns about making housing payments, with 70% of renters and 44% of homeowners feeling this way.

In terms of market activity, only 18% of respondents indicated they are likely to buy a home in the next six months, while 14% of homeowners say they are likely to sell in the same period. About 16% of homeowners plan to refinance in the next six months. Overall, while market confidence has rebounded somewhat, concerns over housing affordability and payment continue to persist.

According to the CoreLogic Home Price Insights report, national home prices increased year-over-year by 5.5% in January 2023 compared with January 2022. However, on a month-over-month basis, home prices declined by 0.2% in January 2023 compared with December 2022. The CoreLogic HPI Forecast suggests that home prices will decrease on a month-over-month basis by 0.1% from January 2023 to February 2023 and increase on a year-over-year basis by 3.1% from January 2023 to January 2024.

While some states like Idaho, Montana, Washington, and Washington, D.C. saw annual declines in home prices, other states like Florida, Maine, and South Carolina saw significant year-over-year increases. Miami, in particular, experienced the highest increase in home prices at 17.3% year over year.

The CoreLogic Market Risk Indicator (MRI) predicts that Bellingham, WA is at a very high risk of a decline in home prices over the next 12 months, along with other cities like Bremerton-Silverdale, WA; Crestview-Fort Walton Beach-Destin, FL; Salem, OR; and Tacoma-Lakewood, WA.

Overall, while their national housing market may experience a slight decline in the short term, the forecast suggests that it will pick up again in the long run, with some states and cities continuing to experience significant growth. However, some areas face a risk of a decline in home prices in the next year.

Freddie Mac's Economic & Housing Research Group in its latest forecast to date 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 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.

Home purchase mortgage applications point to a continued contraction in home sales activity. 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.

Housing Market Predictions For the Next Few Years

The housing market is far better than it was a decade ago. During the two years of the pandemic, 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 of 2021. Over those two years, national home prices increased by around 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 housing market is also being driven by exceptionally favorable age demographic trends. But soaring interest rates are making mortgage payments more expensive since last year and cooling the hot real estate market.

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 housing market will continue to cool down, but not crash. Record-low borrowing rates, supply constraints, and first-time buyers drove prices up, but prices are expected to appreciate slower or remain flat for the next 12-24 months. Rising interest rates may lead to a pullback in prices and improve affordability. Nonetheless, it remains a concern as prices make it hard for some buyers to enter the market. Overall, the market will remain strong, but hot markets will move toward balance.

While the national housing market won't crash, several regional markets may see a decline in home prices in the coming years due to rising interest rates. Higher interest rates could lead to a decrease in affordability, which may result in fewer buyers in certain areas. As a result, regions that were previously experiencing rapid price growth may experience a slowdown or even a decline in home prices. However, it is worth mentioning that this would likely be a temporary setback, as long-term demographic and economic trends are still in favor of the housing market.

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.kpmg.us/insights/2023/march-2023-economic-compass.html
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.investopedia.com/personal-finance/how-millennials-are-changing-housing-market

Long Island Housing Market: Prices, Trends, Forecast 2023

May 6, 2023 by Marco Santarelli

The Long Island housing market has been a hot topic in recent years, with prices and trends constantly changing. In this article, we'll dive into the current state of the market and provide a forecast for what's to come in 2023. The Long Island housing market has been in the news for a while now. With the pandemic driving a surge in remote work, many people are leaving cities and seeking bigger homes in suburban areas.

However, before making a decision to buy or invest in Long Island, it's important to understand the natural hazards and environmental risks that could impact the value of your property. In this blog post, we will discuss the risks associated with floods, storms, fires, droughts, and heat in Long Island.

The Long Island housing market has been showing a steady increase in median sale prices over the past year. In fact, according to Redfin, the median sale price of a home in Long Island reached $600K last month, reflecting a 0.2% increase since last year. Additionally, the median sale price per square foot in Long Island is now $393, up 0.4% since last year. These figures indicate a trend of moderate growth in the Long Island real estate market, which may continue in the coming months.

One of the reasons for this trend may be the increased demand for housing in Long Island. As more people look to move out of densely populated urban areas, Long Island has become an attractive option due to its proximity to New York City and its suburban lifestyle. The COVID-19 pandemic has also influenced this trend, as many people have shifted to remote work, making it easier to live further away from the city.

Another factor contributing to the rising prices is the limited supply of homes for sale. With low inventory levels, buyers are competing for the available properties, which has resulted in bidding wars and higher sale prices. This trend may continue as the demand for housing in Long Island remains strong, especially for larger homes with more space and amenities.

Before investing in a property in Long Island, it's important to consider the natural hazards and environmental risks that could impact the value of your property. Climate change is causing an increase in the likelihood of extreme weather events like heatwaves, storms, and wildfires. Water stress is also a growing concern.

By understanding the risks associated with floods, storms, fires, droughts, and heat, you can make informed decisions and mitigate potential risks. ClimateCheck™ is a useful tool that can help you analyze a property's risk from climate change using the latest modeling and data from climate scientists, universities, and federal agencies.

Will Prices Drop in Long Island Housing Market?

February proved to be a better month for Long Island home sales than January, but year-over-year numbers still show a decline. Despite this, brokers have noticed a recent uptick in buyer activity, offering a glimmer of hope for the housing market. Let's dive deeper into the numbers. According to preliminary data from OneKey MLS, 1,903 homes were contracted for sale in Nassau and Suffolk counties in February, an increase of 28.9% from the previous month.

However, this number is still 15% less than the 2,240 pending home sales recorded in February 2022. Long Island pending home sales have now seen year-over-year declines for the last 20 months, making it clear that the market has been struggling.

Recent Spike in Activity

Despite the decline in year-over-year numbers, brokers have noticed a recent uptick in activity, particularly around mid-January. Open houses have seen more foot traffic, and buyer activity has picked up in the past six weeks. In fact, some brokers have even seen lines forming at their open houses, which is a positive sign. Associate broker at HomeSmart Premier Living Realty in Williston Park, Ken Olson, reports that the phone is ringing more frequently as well.

Prices Continue to Drop

As the market struggles to gain momentum, home prices have continued to drop. The median price of closed home sales in Nassau in February was $640,000, down 3% from January and 1.5% from February 2022. The median price of closed home sales in Suffolk was $532,000, down slightly from January but up 1.2% from February 2022.

The still-low number of available homes for sale is keeping prices from falling even faster, but brokers have noticed more price drops. Olson suggests that if a new listing isn't sold within three weeks, it's a clear indication that the price should be dropped by $10,000 or $20,000.

Inventory Levels and Mortgage Rates

The low number of available homes for sale is also due to higher mortgage rates, which are causing homeowners to hold onto their current homes rather than become sellers. According to bankrate.com, the average mortgage rate for a 30-year fixed loan is 6.96%, which means that homeowners will likely have a higher monthly payment on their next home. As a result, fewer homeowners are willing to sell, which is contributing to the low inventory levels.

While February's home sales were better than January, the Long Island housing market is still struggling. Year-over-year numbers continue to decline, and home prices are dropping. However, brokers have noticed an uptick in activity in recent weeks, which is a positive sign. Inventory levels remain low, but higher mortgage rates are contributing to this issue. It remains to be seen if the Long Island housing market will rebound anytime soon, but the recent uptick in activity is a hopeful sign for the future.