More and more signs are coming from the housing market that historically low mortgage rates and the rush to buy a home are over. As 2022 comes to a close, here’s what real estate experts think will happen in 2023.
Danielle Hale, Realtor.com chief economist: After being a clear sellers’ market for a few years, the housing market in 2023 could feel more like a market for no one. There will be 22.8% more homes for sale, which will be suitable for buyers. However, most of the increase will come from homes taking longer to sell because they are more expensive.
In 2023, the national median price of a home for sale is expected to rise by another 5.4%, less than half the rate in 2022. Still, high prices mean that if a homeowner decides to sell and can find a buyer, they are likely to walk away from the sale with a lot of equity.
Overall, though, we expect home sales to be 14.1% lower than in 2022, which is a big drop. This is because both buyers and sellers will stay away from a changing housing market and economy. As a result, the total for 2023 will be about the same as the rate of home sales in late 2022.
Many people who want to buy their first home in 2023 will only be able to if home prices are higher than what they can afford with their budget and income. As fewer people buy their homes, more people may want to rent, which could keep rents going up. The median rental price is expected to go up by 6.3% across the country, even though more multifamily homes are being built to help meet the growing demand for rentals. Renters who want to save money in the coming year may want to move further to the suburbs.
The still-strong jobs market will keep incomes growing faster than average (3.9%), but they won’t grow faster than expected inflation (4.1%), so many households will still have to make tough budget choices.
After years of high-flying tech cities dominating real estate who’s-who lists, this year’s top performers are likely to be modest, mid-sized domestic industry hubs in the Northeast, South, and Midwest. The slow and steady real estate markets in these areas, where homes are still affordable, will be the stars in 2023. As a result, they will be better able to handle the challenges of affordability in the next few years.
Bob Pinnegar, the National Apartment Association’s president and chief executive officer: In the new year, it will still be a top priority to find long-term, responsible solutions to the housing crisis in our country. An alarming imbalance between supply and demand causes our country’s lack of affordable housing. To fix this problem, we need to build 4.3 million new apartments by 2035.
What the economy says about the housing market
On the economic side, problems with the supply chain have started to improve, and we hope they will keep improving in the coming year. Even though there are jobs, the job market is challenging in places like construction, where people are needed. There are signs that inflation is slowing down, but most of these effects will be seen at the end of 2023.
State and local lawmakers keep thinking about bad ideas like rent control, even though more than 40 years of academic research and real-world case studies have shown that it doesn’t work to make housing more affordable. Instead, rent control messes up the housing market because it makes people less likely to build rental housing and speeds up the deterioration of their existing housing stock.
As these policies continue to be discussed, the rental housing industry will continue to push for responsible solutions, like reviving Section 8 and removing roadblocks to building apartments, that will solve long-term problems with affordability.
Nick Bailey, the president and CEO of RE/MAX, LLC: One thing I know for sure about the housing market in 2023 is that no matter how the economy is doing overall, millions of homes will still be bought and sold by Americans.
Most of the time, when we talk about the health of the housing market as a whole, people look at it from the point of view of an investor. Will the market stops falling, or have we reached its peak? That’s a meaningful conversation to have, but the truth is that people get married, split up, move to take care of elderly relatives, move for job opportunities, and so on every single day. And for those people, it’s less about the interest rate or mortgage rate that week and more about their current situation and whether they can afford a house that meets their needs.
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Jacob Channel, LendingTree’s senior economist: The housing market will stay challenging for many people who want to buy a house. Even though mortgage rates may stabilize, prices may go down, and buyers may be able to negotiate with sellers more in 2023 than they were able to during the height of the pandemic, that doesn’t mean that buying a home will become a walk-in the park. On the other hand, many people will likely still need help affording a house because rates are high and supply is limited.