Housing Market Predictions for 2023

In this blog post, we'll be discussing what experts are forecasting for the United States housing market in 2023. Will house prices go down in 2023? There is no one-size-fits-all answer to this question, as the housing market in the United States will likely vary depending on location and other factors. However, some experts believe that the market will decline in 2023, while others believe that home prices will rise.

Most experts in the housing industry predict less buyer demand, lower prices, and higher borrowing rates. Rate increases, along with a shortage of availability, have pushed many purchasers to the sidelines. Home prices may fall slightly, but not drastically as they did in 2008. Some believe that the housing market will continue to outperform compared to the pre-pandemic.

The housing market is always in flux, and predictions for the future can be challenging to make. However, experts are making some educated guesses about what we can expect in the coming years. Here's a look at some housing market predictions for 2023. According to a Forbes Advisor article, home prices are expected to continue to come down slowly, making it difficult for many homebuyers to access affordable housing.

ALSO READ: Lastest National Housing Market Trends

However, the article notes that there may be some relief for buyers in the form of more inventory becoming available on the market. This may help to level out the playing field, making it easier for more people to find a home that they can afford. Another prediction from US News & World Report is that the housing market will experience a relatively shallow recession that stops and starts in 2023.

This prediction assumes that inflation will be under control by 2024, allowing mortgage rates to remain stable. In this scenario, home prices are expected to rise, but at a slower pace than they have been in recent years. Zillow also has some predictions for the housing market in 2023. One of the most positive is that housing affordability is expected to improve slightly. While high monthly mortgage costs and low inventory will continue to be a challenge, there are signs that conditions may stabilize.

This could be good news for first-time homebuyers, who have been struggling to find affordable homes in recent years. Another Zillow prediction is that home prices will continue to rise but at a slower pace. This could be due to a number of factors, including higher interest rates, more inventory becoming available on the market, and a slowdown in the rate of job growth. While this may make it more difficult for some buyers to afford a home, it could also make it easier for others to find a property that fits their budget.

Finally, some experts predict that the housing market will continue to be shaped by changing demographics. For example, as baby boomers continue to retire, they may be more likely to downsize their homes, creating more opportunities for younger buyers to enter the market. Additionally, millennials are expected to continue to be a driving force in the housing market, with many of them reaching their peak homebuying years in the coming years.

Of course, these predictions are just that – predictions. The housing market can be unpredictable, and unforeseen factors can always come into play. However, these educated guesses can give us a general idea of what we can expect in the coming years. If you're planning to buy or sell a home in 2023, it may be helpful to keep these predictions in mind as you make your plans.

Zillow, the leading online real estate company, released its latest home value and sales forecast in August 2023. As the housing market experiences dynamic shifts, Zillow's predictions offer valuable perspectives on what lies ahead.

Home Value Appreciation in 2023

Zillow's forecast projects a noteworthy 5.8% appreciation in home values throughout 2023. Despite the ongoing presence of elevated mortgage rates, the limited availability of homes for sale is a driving factor behind the upward trajectory of home prices. This continuous trend demonstrates the resilience and strength of the real estate market in the face of challenges.

Inventory Constraints and Price Pressures

The prevailing shortage of homes available for purchase is contributing to the persistent rise in home prices. Even as mortgage rates maintain their higher levels, the tight inventory conditions exert substantial pressure on the housing market. Zillow's forecast, revised this month, predicts that the national Zillow Home Value Index (ZHVI) will conclude 2023 with a 5.8% increase from its starting point. This revision is an upward adjustment from the previous month's estimate of 5.5% growth.

Projected Growth from July 2023 to July 2024

Looking ahead, Zillow anticipates a continued ascent in typical home values. The forecast estimates a rise of 6.5% from July 2023 to July 2024. This projection underscores the resilience of the housing market and its potential for sustained growth, even in the face of complex economic factors.

Impact on Sales Volume

The scarcity of available homes for sale has led to increased competition among buyers. In July 2023, the number of listed homes was just over half of what it was in the same month of 2019. Additionally, 29% fewer new listings entered the market in July compared to the pre-pandemic norm. This scarcity has resulted in homes under contract going pending in a mere 12 days – a notable difference from the 2018 and 2019 averages.

The combination of tight inventory conditions and elevated mortgage rates is expected to continue influencing sales volume in the foreseeable future. Zillow's projection for 2023 foresees 4.2 million home sales, reflecting a 17% decline from the previous year. While this decline may raise concerns, it aligns with historical patterns and speaks to the broader economic landscape.

Top 5 Metros Where House Prices Will Drop Most by July 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 19 of the nation's 894 regional housing markets between July 2023 and July 2024. Houma, a city located in southern Louisiana, tops the list with an expected decline of 2.9% in home prices by July 2024.

Metro Area	Change in Values
Houma, LA	-2.9%
McComb, MS	-2.8%
Hobbs, NM	-2.6%
Morgan City, LA	-2.5%
Big Spring, TX	-2.4%

Top 5 Metros Where House Prices Will Increase Most by July 2024 

Zillow still predicts that the vast majority of regional housing markets will see home values appreciating in 2023. Among the 894 regional housing markets Zillow economists analyzed, 874 markets are predicted to see rising house prices over the next twelve months ending with July 2024. One market, El Dorado, AR, is predicted to remain flat for home price growth. The housing market in Atchison, KS is forecasted to see the highest year-over-year house price growth of 16.5%.

Metro Area	Change in Values
Atchison, KS	+16.5%
Rio Grande City, TX	+16.3%
Parsons, KS	+15.7%
West Plains, MO	+13.8%
Jackson, WY	+13.1%

Fannie Mae, a leading source of mortgage financing in the United States, has released its latest housing market forecast. The forecast provides insights into the anticipated trends and expectations for home sales, housing starts, and mortgage originations.

Home Sales Forecast:

Fannie Mae's overall home sales forecast remains relatively stable, with a slight revision in the numbers. The projected total sales for 2023 have been revised upward to 4.86 million units, compared to the previous estimate of 4.84 million units. This revision suggests a slightly more optimistic outlook for home sales in the current year. However, for 2024, there has been a slight downward revision to 5.01 million units, previously estimated at 5.03 million units.

Housing Starts Forecast:

The forecast for housing starts, which refers to the number of new residential construction projects initiated, has seen an upward revision. This revision is mainly attributed to a more positive outlook for near-term single-family housing starts. While the adjustment is modest, it indicates a favorable trend in new construction activity.

Mortgage Originations Outlook:

Fannie Mae's purchase mortgage originations outlook has experienced a modest upward revision, aligning with the revision in home sales. This adjustment reflects the expectation of increased mortgage originations in line with the projected growth in home sales. However, the positive revision in purchase mortgage originations has been offset by a downward revision in refinance originations. As a result, the overall impact on total originations for 2023 is minimal, with the projected volume remaining at $1.65 trillion, unchanged from the previous forecast of $1.66 trillion.

Looking ahead to 2024, Fannie Mae anticipates a further increase in total originations, with a projected volume of $2.03 trillion. This figure represents a slight upward revision from the previous estimate of $2.02 trillion. The revised outlook for mortgage originations in 2024 suggests continued growth in the housing market and mortgage financing activities.

In conclusion, Fannie Mae's housing market forecast indicates a relatively stable outlook for home sales, housing starts, and mortgage originations. While there have been slight revisions to the numbers, the overall trends point towards a resilient housing market with modest growth expectations. As the market evolves, it will be essential to closely monitor these projections to make informed decisions in the real estate and mortgage sectors.

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, mortgage rates, home prices, and available inventory are key considerations for homebuyers when making purchase decisions. Unfortunately, none of these elements tilts in favor of buyers in today’s market.

Meanwhile, sellers are also grappling with similar factors, especially those who must secure a new home before selling their current one, as they may encounter difficulties in finding suitable options and managing the costs to afford them. However, as we approach the fall season, a time typically favored by homebuyers, a slimmer of optimism emerges.

Optimistic Trends Ahead

If the current trend of a narrowing gap in inventory persists, it will be very likely to see more newly listed homes available than the record low set last fall and winter. In addition, given seasonality and recent momentum in the housing market, we do not expect to see a new peak price surpassing the June 2022 high of $449,000.

Furthermore, the likelihood for the Fed to take another “wait-and-see” strategy in its September FOMC meeting remains high, which may help potentially mitigate the recent upward trajectory of mortgage rates. Another key point for both buyers and sellers to keep in mind is that national trends may or may not match what’s happening in your market at your price point.

Key Findings

• The median listing price grew by 1.1% over last year. Median listing prices rose on an annual basis for the fourth week in a row, marking a noteworthy rebound following a period of decline in June and July.
• New listings–a measure of sellers putting homes up for sale–were down again this week, by 5.7% from one year ago. For 59 weeks, there have been fewer newly listed homes compared to the same time one year ago. However, this gap has been shrinking as we start to compare against low new listings in the latter months of 2022. This week’s data shows a 2.4 percentage point improvement over last week.
• Active inventory declined, with for-sale homes lagging behind year-ago levels by 7.2%. This past week marked the 9th consecutive decline in the number of homes actively for sale compared to the prior year, however, the gap narrowed slightly compared to the previous week’s -8.6% figure.
• Homes spent 4 extra days on the market compared to this time last year. For more than a year (57 weeks in a row), the time a typical home has been on the market is up compared to the same time one year ago, but the gap has been generally declining this year.

June 2023 Housing Market Analysis and Forecast

The CoreLogic Home Price Insights report offers an extensive view of the Home Price Index (HPI) product with analysis up to June 2023 and forecasts up to June 2024.

Current Home Price Trends

Steady Growth Year Over Year

In June 2023, home prices across the nation, encompassing distressed sales, exhibited a year-over-year increase of 1.6% compared to the same period in 2022. On a monthly basis, there was a 0.5% surge in home prices in June 2023 in comparison to May 2023. It's important to note that these figures incorporate revised data from public records, ensuring the accuracy of the analysis.

Forecasted Price Trends

Projected Upward Trajectory

The CoreLogic Home Price Index (HPI) Forecast indicates an anticipated month-over-month rise of 0.6% in home prices from June 2023 to July 2023. Additionally, a year-over-year increase of 4.3% is projected from June 2023 to June 2024, suggesting a positive outlook for the housing market.

Analyst Insights

Rebounding from a Low

Despite an annual home price growth of 1.6% in June, which remains near an 11-year low, there are signs of a potential turnaround. The slight increase from May indicates that the market might be stabilizing. CoreLogic experts anticipate a pickup in year-over-year home price appreciation throughout the remainder of 2023, possibly reaching 7% by early 2024.

Ten states, including the District of Columbia, witnessed declines in annual home prices in June. Particularly in the Northwest, where housing supply is limited, prices are expected to stay elevated due to persistent buyer-seller imbalances.

Regional Variation

Market Diversity Across States

The CoreLogic HPI provides comprehensive insights by segmenting markets based on property type, price, time between sales, loan type, and distressed sales. Nationally, a 1.6% year-over-year home price increase was observed in June.

States such as Arizona, California, Colorado, Idaho, Montana, Nevada, New York, Oregon, Utah, Washington, and Washington, D.C. reported annual declines in home prices. Conversely, New Jersey (6.9%) and New Hampshire and Vermont (both 6.4%) recorded the highest year-over-year increases.

Metropolitan Area Analysis

Exploring Urban Home Price Changes

An in-depth look at large metropolitan areas reveals diverse trends in home price changes. Miami stood out with an impressive 8.9% year-over-year gain in June, indicating the dynamic nature of the urban housing market.

Top Markets at Risk of Home Price Decline

Assessing Vulnerability in Housing Markets

The housing market is a dynamic ecosystem influenced by various factors, and understanding potential risks is essential for both investors and homeowners. The CoreLogic Market Risk Indicator (MRI) provides valuable insights into the health of housing markets across the United States. This monthly update assesses the probability of home price declines over the next 12 months, guiding stakeholders in making informed decisions.

Identifying High-Risk Markets

The MRI's analysis has identified several markets that are at a very high risk of experiencing a decline in home prices, with a probability exceeding 70%. These markets are:

• Cape Coral-Fort Myers, FL: This region faces a significant likelihood of home price declines in the upcoming year. The MRI's assessment points to factors that might contribute to this risk, such as supply-demand imbalances, economic fluctuations, and other local dynamics.
• North Port-Sarasota-Bradenton, FL: Situated in Florida, this market also falls within the very high-risk category for potential home price declines. External influences like economic trends and market saturation could be influencing this risk assessment.
• Provo-Orem, UT: Despite being located in Utah, a state known for its economic stability, Provo-Orem faces a very high risk of home price declines. Local economic conditions and demographic changes could be playing a role in this assessment.
• Spokane-Spokane Valley, WA: This Washington state market is also marked as very high risk for potential home price declines. Factors like job market trends and housing supply may be contributing to this risk assessment.
• Lakeland-Winter Haven, FL: The housing market in this Florida region is identified as very high risk in terms of potential home price declines. Economic fluctuations and other local dynamics could be influencing this risk assessment.

Understanding the Implications

Being labeled as very high-risk doesn't necessarily mean that home prices will definitely decline in these markets. Instead, it serves as a cautionary signal for investors, buyers, and sellers to carefully evaluate their strategies and decisions. The MRI's analysis takes into account a range of factors that can impact home prices, such as economic indicators, local job markets, supply-demand ratios, and more.

It's important to note that real estate markets are influenced by complex interactions of factors, and the MRI provides a quantitative assessment to guide decision-making.

Informed Decision-Making

The CoreLogic Market Risk Indicator empowers individuals and organizations with the information needed to navigate the ever-changing landscape of real estate. By understanding the risk level in specific markets, stakeholders can adjust their strategies and make decisions that align with their goals and risk tolerance. Whether it's an investor considering a property purchase or a homeowner contemplating selling, the MRI offers valuable insights for making informed choices in the dynamic world of real estate.

U.S. House Price Index – March 2023

The Federal Housing Finance Agency (FHFA) has released the U.S. House Price Index for March 2023, indicating a 0.2% increase in January 2023 from December 2022. The annual change in house prices from January 2022 to January 2023 was 5.3%, while the 0.1% decline reported for December 2022 remained unchanged.

Seasonally Adjusted Monthly Price Changes by Census Division:

The FHFA's report also indicates seasonally adjusted monthly price changes for nine census divisions in the US from December 2022 to January 2023. The Pacific division saw a -0.6% change, while the New England division saw a +2.0% change.

12-Month Changes by Census Division:

The report further highlights the 12-month changes in house prices by census division. The Pacific division saw a -1.5% change, while the South Atlantic division saw a +9.6% change.

Insights from FHFA:

According to Dr. Nataliya Polkovnichenko, Supervisory Economist in FHFA's Division of Research and Statistics, “U.S. house prices changed slightly in January, continuing the trend of the last few months. Many of the January closings, on which this month's HPI is constructed, reflect rate locks after mortgage rates declined from their peak in early November. Inventories of available homes for sale remained low.”

U.S. House Price Index Report – 4Q 2022: FHFA HPI®

According to the Federal Housing Finance Agency (FHFA), U.S. house prices rose 8.4 percent between the fourth quarters of 2021 and 2022. The U.S. housing market has experienced positive annual appreciation each quarter since the start of 2012. FHFA’s seasonally adjusted monthly index for December was down 0.1 percent from November. Here are the significant findings of the report.

State-Wise House Prices

House prices rose in all 50 states, while prices declined in the District of Columbia between the fourth quarters of 2021 and 2022. The five areas with the highest annual appreciation were Florida (15.2 percent), North Carolina (13.4 percent), South Carolina (12.9 percent), Hawaii (12.8 percent), and Maine (12.2 percent). The areas showing the lowest annual appreciation were the District of Columbia (-0.8 percent), California (2.3 percent), Idaho (3.1 percent), Oregon (3.6 percent), and Washington (3.7 percent).

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