Projects for multifamily and new home construction that were scheduled to be delivered in 2024 or 2025 are likely to be delayed.getty
The housing market is indicating that historically low mortgage rates have ended and that the home-buying frenzy has come to an abrupt halt. Here are the expectations for 2023 from real estate professionals as we approach the end of 2022. Danielle Hale is the chief economist at Realtor.com. After years of a clear sellers' market, 2023 could feel like a no-one's market. Although we expect to see some buyer benefits in the form 22.8% more homes available for sale, this will largely be due to homes taking longer to sell given the difficult affordability conditions. The national median annual price of 2023 homes for sale will rise another 5.4%, less than half the rate seen in 2022. If homeowners decide to enter the market, they will likely walk away with substantial equity. We expect home sales to fall by 14.1% in 2022, as buyers and sellers both pull back from an economy and housing market that is in transition. The 2023 annual sales will be approximately in line with the pace of home sales in the latter part 2022. Many potential homebuyers will see 2023 as a disappointment rather than a celebration, as the cost of home ownership is higher than they can afford. Rents could rise as fewer households decide to make the leap to homeownership. The median rent will rise 6.3% nationally, even though multifamily housing is increasing in supply to meet rental demand. Renters who want to save money in the coming year may look into moving further to the suburbs. The strong job market will ensure that incomes grow at a faster pace than the historical average (3.9%), but they won't exceed inflation expected (4.1%). This means that many households will have to continue making difficult budget compromises. The top performers for this year are expected to be small, mid-sized hubs of domestic industry in the Northeast, South and Midwest. These areas will continue to have affordable homes and will be the stars of 2023.
Affordable rental housing is crucial to increasing affordability and household stability in... (+) the housing market.getty Bob Pinnegar is the president and chief executive officer at the National Apartment Association. In the new year, it will be a priority to pursue sustainable and responsible solutions for our nation's housing affordability crisis. The nation's affordability problems are caused by a worrying supply/demand imbalance. We must build 4.3 millions new apartments to address this problem by 2035. The economic side of things has seen supply chain problems improve and should continue to do so in the coming year. Despite steady job growth, there are still challenges facing the labor market in construction and other areas that require workers. Although inflation is showing signs of slowing, any significant changes are unlikely until 2023. Local and state lawmakers continue to contemplate damaging policies such as rent control. More than 40 years worth of academic research and real-life cases have repeatedly shown that it is not effective in addressing affordability. Rent control creates a distortion in the housing market and acts as a deterrent for new rental housing developments and an incentive to the decline of existing housing stock. The rental housing industry will continue to push for responsible solutions, such as revitalizing Section 8 or removing obstacles to apartment development, that will help with affordability issues long-term.
Nick Bailey, President and CEO of RE/MAX, LLC. One thing I know for sure about the housing market in 2023, is that regardless of macroeconomic conditions, Americans will continue buying and selling millions of homes. Most people approach the discussion about the overall health and viability of the housing market from the perspective of an investor. Is the market at its bottom or has it reached the peak? This is a very important discussion. However, the truth of the matter is that people are moving every day to pursue new career opportunities, getting married or divorcing, and also moving to care for their aging relatives. For those people, it is less about the interest rates or mortgage rates this week than about their current situation and whether they are able to afford a house that suits their needs.
As inflation levels drop, I believe that the 2023 spring selling season will be a bright spot. As new construction is slowing down, there will be a lot of demand. The Millennial home buyer, which makes up a large segment, will likely make their move. RE/MAX and SWNS Media Group conducted a survey to find that 84% of Gen Z, 79% Millennials, 61% of respondents 77 years old, and 61% plan to purchase a home or condo within the next few decades. I believe 2023 will be better for housing than most people think. This is because there won't be any year-over-year comparisons with 2021, which was a historic outlier that made 2022 seem smaller than it actually was.
Jacob Channel, LendingTree's senior economist says that the housing market will continue to be difficult for many potential buyers. Although mortgage rates may stabilize, prices may decline and buyers might be able negotiate more with sellers in 2023 than in the peak of the pandemic. However, this doesn't mean that home buying will suddenly become easy. Due to the high rates and limited supply, affordability issues will likely continue for many.
Borrowers should not expect rates to drop to levels comparable to their 2021 record lows or to the same level as at the beginning of 2022. Although home prices will not fall everywhere, a combination between high rates and low demand from homeowners will likely push them down this year. Even though a drop of 5% to 10% may seem drastic, remember that home values have risen so rapidly since the peak of the pandemic. This makes it unlikely that any declines in prices this year will completely wipe out the gains.
Lawrence Yun, Chief economist of the National Association of Realtors, and Senior Vice President of Research: 4.78 Million homes will be sold. Prices will remain stable, and Atlanta will continue to be the top realty market in 2023 and beyond. The median home price will rise to $385,800 from $513 million in 2022. This is a 0.3% increase over the current year (384,500).
One-half of the country could see small price increases, while half the country might experience slight price drops. California markets may be an exception. San Francisco is likely to see a price drop of 10-15%. After a 7% increase for 2022, rent prices will rise by 5% in 2023. In 2023, foreclosure rates will be at an all-time low of 1%. The average historical rate of 2.5% will be beaten by 1.3% growth in the gross domestic product. The 30-year fixed mortgage rate for 30-years will settle at 5.7% after it surpassed 7% in 2022. This is due to the Fed slowing down the pace of rate increases to manage inflation. This is less than the historical rate of 8.8% in pre-pandemic times.
Taylor Marr, Redfin deputy Chief Economist: The slowing of inflation and the possibility that the Fed will ease rate hikes in 2019, are likely to lower mortgage rates and increase homebuying demand. However, it's not a rebound or a recovery. The demand is still far below its peak. We are keeping an eye on the labor markets to confirm that inflation is continuing to slow down. Inflation is caused by a strong job market, such as the one we currently have. It pushes up wages which leads to higher prices. Although it may seem counterintuitive, a slight increase in unemployment and/or slower growth could help to bring down mortgage rates. This could lead to an increase in pending sales by early 2023 if we see an increase in demand in the early stages.
Selma Hepp is the interim head of CoreLogic's Office of The Chief Economist. After the recent rise in mortgage rates above 7%, real-estate activity and consumer sentiment about the housing market plummeted. The October home price growth was in the single digits and will continue to do so throughout the year and well into 2023. While some housing markets have experienced significant recalibrations since the spring peak, they are likely to experience losses in 2023. Further deteriorating inventory and positive economic news could help stabilize home prices.
Zillow Senior Economist Jeff Tucker: While the rental market is cooling, it has not brought relief to renters. There are signs that affordability could improve over the next few months. The annual rent growth has dropped from record 17.2% annual growth between February and November to 8.4% year over year growth.
Tenants looking to sign a lease for 2023 should be encouraged by this data. However, they need to remain vigilant to the market and take action quickly if they find a rental that suits their needs and budget. The rents are higher than ever, but there will be tradeoffs and flexibility in the next year. Tenants who are facing renewals should be aware that they have more bargaining power and should consider the costs of nearby rental options before negotiating.
Kuba Jewgieniew is the CEO and founder at Realty ONE Group. Locked-in lower interest rates will ensure that homeowners stay in their homes. Concerning Realtors: 300,000-400,000 new licensees have entered the realty market in the last couple of years (similarly to the relative growth of NAR members from 2005-07).
This career path was chosen by many top-producing professionals during the hot real estate markets 2012-2020. They have sold over $100 million in transactions per year. They haven't seen a downturn like this since 2008. There are over 90,000. Many of these brokerages will merge, while others will be wiped out. Friends and family are their Plan B funding source to access capital to keep them afloat.
The average credit card interest rate is currently at over 18%. It will likely rise to the 20's in the near future. In high inflation times, home equity lines of credit have become more popular.
Bright MLS chief economist Lisa Sturtevant: The housing market has undergone a major transformation over the past year as rising mortgage rates drastically slowed home sales activity. The housing market is expected continue to correct in 2023. However, we might need to rethink what normal looks like. Although mortgage rates will fall slowly in 2023 they will still be above 6% for the majority of the year. Although not historic high, the 6% mortgage rate and rapidly rising prices will keep potential buyers away from the market. Bright MLS forecasts that there will be only 4.87 million home sales by 2023. This is a decrease of 6% compared with 2022 and the lowest level in nine years.
In 2023, the median home price will remain relatively flat with an expected 0.3% increase year-over-year. The national average does not reflect the entire picture. In the coming year, prices will rise in areas that are more accessible and have a strong local economy. Higher-cost metros where housing affordability is a problem are more at risk. Additionally, prices will be more severe in pandemic boom areas where demand has soared. It was not sustainable or typical to see a frenzied pace in home sales during the pandemic. This is also not good for a stable, healthy housing market. In 2023, it is best to return to a slower market that has experienced modest price growth.
L.D. Low absorption rates signify a price gap between sellers and buyers. This was a temporary environment in the past. People lost their jobs and still had variable rate mortgages. Sellers will need to do a reality check in 2023 and lower their prices to sell. The housing market becomes less attractive to potential buyers as mortgage applications are very low and interest rates continue rising. Although some markets are in high demand, many markets will experience large corrections. Some markets like South Florida will even see price drops of 20-30%.
A housing bubble is possible when there is a strong housing market and a sharp rise in median home prices. We saw the first drop in home prices in 10 years after June's peak. The lagging Case-Shiller Index showed a 1.3% decline in price increases. Black Knight also reported that U.S. equity fell 7.6% in the third quarter, marking the biggest drop since 2009. Black Knight also reported that U.S. home equity fell 7.6% in Q3, the largest drop since 2009. Getty Images
Kate Wood, NerdWallet's home expert: It is tempting to believe that 2023 will bring about normalization after three years of an incredibly unbalanced market for housing. The market is still far from normal even though it's not going to extremes. Although rates have dropped from their peak in October and November, the Federal Reserve is continuing to push for higher rates. The lows we are seeing right now could be the eye of a hurricane. Rate forecasts could be thrown off the rails by major economic and geopolitical developments, just as they did last year. While home prices are expected to continue falling next year, it won't lead to a bubble burst. These price drops will look more like a balloon slowly descending -- not going skyward but still out of reach for many. The most dramatic drops in markets will be seen in those areas where home values have grown the fastest. Therefore, even though prices are dropping, home values will likely still rise year-over-year. Despite buyers being forced out by higher interest rates, the demand for the market will continue to exceed supply.
Many potential sellers won't be willing to sell the historically low interest rates they bought at or refinanced to in exchange for a rate that could double. There may be an increase in homeowners who move without selling. They are keeping their homes and converting them to single-family rentals, instead of selling for a lower payment. Tenant's rent will cover the mortgage,