Real Estate Predictions for 2023
Happy New Year!!! As we move into a new year, many local and national organizations are trying to predict what 2023 will look like in Real Estate. So we have compiled some predictions to keep you informed of what we “may” be able to expect in the upcoming year.
California Association of Realtors
Based on the latest economic news, all signs point to a bumpy start of the year in 2023. Despite having improvements in inflation, a slight increase in consumer sentiment and healthy unemployment numbers, the housing market and the economy overall at the state and national level still face many challenges.
The Federal Reserve raised rates again but the recent reprieve on mortgage rates may encourage some buyers to take advantage of the recent shift in the market. However, consumers are still grappling with rising prices and suggest that slower economic growth could be ahead.
Despite variations in methodology, many forecasts foresee prices in 2023 flattening or falling compared with 2022. Zillow, which forecasts fluctuations in typical home values, foresees values dropping 0.7% nationally between November 2022 and November 2023, according to its most recent forecast.
National Association of Realtors
Housing inventory is expected to remain tight in 2023, with housing starts below historical averages and fewer homeowners willing to sell, said NAR Chief Economist Lawrence Yun. The ongoing housing supply challenges will prevent home prices from falling, though price appreciation will slow, he added. “I see many hopeful signs for early next year,” Yun said.
“After a big boom over the past two years, there will essentially be no change nationally” in home prices in 2023, Yun said. “Half of the country may experience small price gains, while the other half may see slight price declines.”
Yun said, adding that he expects mortgage rates to settle at 5.7% by the end of next year.
Chief Economist Danielle Hale was upbeat about the prospects of property appreciation, projecting a 5.4% increase in existing-home prices for 2023. “We think price growth will be half of what it was in 2022, and we may see some months of year-over-year declines,” Hale said. “But overall, we believe prices will be higher. [Housing] shortage conditions are still going to be present in the market.”
The housing market will be tepid in 2023, with only lukewarm demand and a limited amount of inventory available for sale,” Greg McBride chief financial analyst for Bankrate, predicts. However, “mortgage rates could pull back meaningfully next year if inflation pressures ease. The hope is that, as supply and demand within the housing market normalizes, interest rates can start to come back down to earth. Until this happens, those who simply cannot afford the costs of borrowed money will have to continue to wait. For those waiting on the sidelines holding out hope that rates may soon drop, they might have to accept the fact that the lower-rate financing windows open in 2020 and 2021 have closed.