2023 Real Estate News & Forecast
Home Prices
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.
A good time to buy?
Home prices flattening. After big gains in the past three years, home prices are expected to stay flat. The National Association of Realtors, or NAR, predicts median existing home prices will rise just 0.3% in 2023 — a stark contrast from the 9.6% year-over-year increase in 2022 and eye-popping 18.2% jump in 2021.
Home Sales will Slide
In 2020 and 2021, record low interest rates, double-digit home price increases, low inventory and bidding wars galore had buyers in a frenzy. This year, skyrocketing mortgage rates, rising monthly payments and loss of buying power have brought the market to a near standstill. The determining factors of just how much sales will fall include what happens with mortgage rates, housing supply and overall economic conditions. Other factors like the strength of the job market, wage growth and consumer confidence could also mitigate the sales slowdown.
Mortgage Rates are likely to pull back
High mortgage rates combined with high home prices have made a home purchase much less affordable this year as monthly payments increased by more than 50%. Any improvement in rates is welcome news to weary buyers. Our experts believe that mortgage rates will likely remain relatively high during the few months of the year but then edge lower and stabilize, with rates falling below 6% by the end of the year.
Home Prices will level off
Forecasts range from prices falling 4% to a price increase of more than 5%. The only near certainty is that there won’t be the double-digit price increases that have been the hallmark of the pandemic market. We believe low inventory will keep home prices from falling too far.
Inventory will remain tight
One of the biggest causes of skyrocketing home prices was lack of housing supply. Next year will see an improvement, but inventory will remain below normal levels. Currently, there is an equivalent of 3.3 months' supply of existing homes available for sale, according to NAR. Inventory is expected to increase by nearly 23% in 2023. The pace of sales has slowed considerably from the days when most sellers made deals in a week or less. We beleive the average time on the market doubling from 11 days in 2022 to 22 days next year, which will allow the housing supply to build up. Buyers and sellers could return as 2023 progresses, especially if mortgage rates move lower. Still, even as supply improves, the number of homes on the market will remain below pre-pandemic levels. Though it may feel like there are more homes for buyers to choose from, inventory will remain tight.
There will be more variability between markets
“Hot” was the most common word used to describe the majority of real estate markets as recently as the first few months of 2022. That will no longer be the case going into 2023, as different metros will start to see differences in demand. However, there will be markets, particularly in the South and Midwest, that remain very much in demand and could see home prices increasing throughout the year.