Housing Market Forecast 2023

An increasing number of economists and real estate forecasters are warning of a coming marked slide in the US housing market.

Sales have definitely slipped, more than 50% in fact since the peak of 2022, yet home prices are holding their own, even though buyers face huge hurdles to buy. We might question whether a slide could happen in the spring of 2023 since it’s come such a long way down already.

And if the FED decides to pivot on rates, then buyers might return full force to the market, thus driving prices up significantly. Those who hold properties don’t seem to be under pressure to sell. We may have passed the point where a downturn could happen.  Clearly, the housing market and stock market are seemingly optimistic the worst is behind us and the path through the next 5 years might be okay.

No economists, Fund managers, CEO’s and real estate experts seem able to time the forecasted price bottom, so we’re left wondering about the quality of  housing predictions today.  Stats below show the price collapse hasn’t happened as predicted. Despite higher mortgage rates, the market seems to be resilient.

New data out from NAR shows sales declined for yet another month, and yet prices climbed.  Yes, despite rising mortgage rates, loan qualification hurdles, and continued high home prices, people are still buying homes for full price.

Existing home sales fell for the consecutive month and are down 34% from this time last year. Total sales in 2022 fell 17.8% vs 2021 reflecting the economic downturn driven by Fed rate rises.

Existing Home Sales January Sales Report
Existing Home Sales. Screenshot courtesy of NAR.

Home inventory has risen slightly to 2.9 months from 1.7 months last December.  The new median sales price is $366,900 which is up 2.3% year over year.

NAR Chief economist Lawrence Yun said it was another difficult month for buyers. He noted that mortgage rates have fallen, yet not enough for sales improvement. The affordable market has fallen through the bottom, and as corporate layoffs pick up pace we’re likely to see reduced demand through the first 6 months. The median income needed to purchase an average home today has more than doubled to $88,300 vs the start of the pandemic, in 2019.

Yet right now, Realtor’s® confidence seems to be rising. NAR Realtor® confidence survey reports 12% of expect a year-over-year increase in buyer traffic (up from 9% in November 2022 but down from 41% in December 2021) and 9% forecast a year-over-year increase in seller traffic in the next 3 months.

Stats show fewer buyers are doing virtual tours to buy and there is not as much demand for work at home properties.

US Regional Sales Stats

In the Northeastern region home sales reclined 1.9% from November  December, a fall of 28.8% from December 2021. Median price in the NE fell 1.6% from 12 months ago to $391,400.

In the Midwest, home sales dropped 1.0% from November and they’re down 30.3% from last December. The median price rose 2.9% to $262,000, year over year.

And in the Southern region, during December, home sales fell 2.2% which was a 33.1% drop vs last December. Median price in the South rose 3.5% year over year to $337,900.

And in the Western region, existing-home sales stayed steady during December, yet are down a whopping 43.4% from last December. The median price rose slightly to $557,900 year over year.

Jobs, Wages, and the Economy

Surprisingly, Americans react to events, day to day, which explains the volatility in stock prices. As the economy cools (Fed rate 25 point rise expected), the stock market will likely take a hit too. Although it should be noted that stock investors are quite optimistic after good earnings reports, good GDP for 4th quarter, and persistent low unemployment numbers. These stats do have an effect on buyer intent.

It’s only price and mortgage rates that stop buyers from buying (consumers still have trillions in savings).  The recession still hasn’t changed the mood of the market enough.

Surprisingly, first time buyers comprised 31% of the home purchases, up from 28% in November.  Falling mortgage rates (30 year dropped to 6.15%) may have provided a window for buyers.

Yet prices are staying stubbornly high, particularly for houses. Existing single-family home prices reached $372,700 last month up 2.0% from one year ago.

Realtors report pending sales down and that follows a trend throughout 2022. Will  2023 be much different?

US pending home listings chart.
US pending home listings chart. Screenshot courtesy of Realtor.com

Decision: Wait for the Recession to End Before Buying?

Many buyers and sellers may be riding out the recession. Because rates would fall and home prices would being to rise again. Of mortgage defaults are rising which suggests more inventory will come available as the economic downturn captures some of those who bought recently or must refinance at 6+% during 2023.

The forecast then is for more price moderation, perhaps even steep price falls in late winter as the US administration pushes the country into recession to manage the spending-induced inflationary surge.

It takes some time for higher interest rates to slow the economy. The lag time before different fiscal catalysts take effect is something few experts understand.

Yet it will slow housing supply too which would therefore keep home prices elevated. While home prices rose significantly in 2021/2022 (40%), they will not likely fall that amount in 2023.

What do Homebuyers Believe?

Homebuyers are willing to pay less for a home purchase and they believe mortgage rates are going to climb. That suggests they see no openings for them in the market in 2023.

Indeed mortgage rates have risen faster than ever.  Freddie Mac, posts that the 30-year, conventional, fixed-rate mortgage rose 6.11% in October vs September. That same mortgage rate in 2021 averaged 2.96%.

Fannie Mae reports a pessimistic US consumers and their Home Purchase Sentiment Index fell 4.1 points in October to a new record low of 56.7, which is its 8th consecutive monthly reduction.

Fannie Mae Home Purchase Sentiment.
Fannie Mae Home Purchase Sentiment. Screenshot courtesy of Fanniemae.

Latest Home Prices: NAR

NAR’s newest update shows prices are still up 13.7% year to date and are up 10.3% during the week ending Dec 3rd. Active listings have risen 53% and new listings have consistently been declining.

Newest Update for Dec 3rd, 2022.
Newest home stats Update for Dec 3rd, 2022. Screenshot courtesy of NAR.

According to Redfin’s November housing market report, home prices dropped in only 11 of the 50 most populated metros.  Most of them were in California which is seeing a brisk exodus of residents.  Redfin’s stats showed home

City housing markets which are currently hottest include: Manchester/Nashua NH, Fort Wayne IN, Lacrosse WI, Columbus OH, Topeka KS, Burlington VT, Lafayette IN, Worcester MA, Springfield MA, Portland ME, Hartford CT, Elkhart IN, Rockford IL, Akron OH.  These cities may be benefitting from a migration of urban dwellers looking for places with less crime, taxes, and room to grow.

Market Factors

Here’s some factors that suggest home prices will decline however the question of whether there might be a housing market correction or crash is unsettled.

  • inflation looking like it will persist for a long time
  • deglobalization changes supply chains
  • international trade tensions rise
  • commodity prices heading back up with China reopening
  • natural gas and oil heading back toward record levels in 2023
  • consumer sentiment as lowest levels ever
  • consumer savings depleting every month
  • Europe facing a recession
  • jobless claims are rising
  • mortgage rates continue rising quicker than the Fed rate thus raising the cost of buying

So there is no one coming to save the housing market and new construction permits and starts are plummeting.

Rental Housing Report November

Zumper’s latest report on rents show a slight decline in November.

Rent prices last 12 months. Screenshot courtesy of Zumper.

The US economic forecast is very uncertain so forecasting home prices in the next 3 to 6 months, or next 5 years is more than just difficult. However, we can feel confident that home prices will stay elevated and that real estate investors and buyers will find homes holding their value for many years, even past a recession.

Home Buyer and Home Sellers Decision

Contradictory factors complicated decision to buy:

  • home price history timeline charts show prices keep rising faster than inflation
  • affordable housing shortages wont’ be fixed anytime soon – endless demand
  • rising US immigration and more migration to low tax states
  • millennials still need to buy to start their families
  • rent prices are rising too fast which eats down payments and savings
  • those buying in high tax states could see lower prices
  • weak political support for new housing zoning and builder assistance
  • a Republican mid term election may encourage investors that the future is brighter
  • it’s the only investment you can live in
  • mortgage rates will likely recede once this current economic crisis eases (after recession)
  • big fortunes from investing in the stock market are over now
  • young adults more aware of financial planning, retirement, and long term value of a house
  • rental income properties offer excellent returns, rising rents, and good tax writeoffs
  • deglobalization means growing investment in US businesses and supply chains

Will home prices drop and is a housing crash possible? Experts say not likely because demand is too high and buyers do have money to purchase houses.

Stats show the luxury homes market isn’t being affected much (see stats below) so wealthy buyers aren’t anticipating a stock market crash or a housing market crash in the US.  Home sales in the south are seeing a steep change and markets such as Austin Texas look very shaky with huge increases in inventory.

Buyers still can buy via 5 year adjustable rate mortgages, fully knowing that rates in the years ahead will be lower. Yet, the Fed is experiencing difficulty affecting inflation at all. It’s thought to be out of their hands, uncontrollable. Pushing rate hikes might worsen the cost of credit instead of stopping the purchasing of homes.  The Fed may believe they must push the US economy into recession, to control price rises.

Luxury Housing Market Forecast

Realtors confidence in first time buyers is declining slightly for obvious reasons, however they remain confident of wealthy buyers who are buying second homes and vacation homes.

This graphic shows clearly that the market is in luxury priced homes. Soon the luxury condo sector will be soon also be the focus for 2022 as Americans head back to the cities to find apartment and condo availability dried up.  Realtors serving investors will have the best outlook in a continuing tight market. NAR’s realtor sentiment stats show agent’s mood is darkening. Hopefully, the spring will bring renewed growth.

Cities with the top performing luxury home sales outlook include Austin, Phoenix, Nashville, Tampa, Denver, Dallas, Atlanta, and Miami.  This is the percent change in price by price category during May. Compare it to the one above for June.

Enjoy this epic report on the US housing market and forecast. You’ll find commentary from experts and stats from major providers including NAR, Forisk, US Census Bureau, NAHB, Zillow, Realtor.com, St Louis fed, Statista, Fannie Mae, Fred, Nerdwallet, and more. Please bookmark and share on social media.

New Home Construction and Sales

December 2022 Housing Permits

Building permits issued in December (annual rate of 1,330,000) dropped 1.6% month to month. That rate is down 29.9% below last December’s rate of 1,896,000 permits issued. Single‐family house permits in December (730,000); this fell 6.5% from November’s total of 781,000.

An estimated 1,649,400 housing permits were issued in 2022 and that is down 5% from 2021.

Privately‐owned housing starts in December feel 1.4% to 1,382,000 units from  1,401,000. That was down 21.8% from December of December 2021 at 1,768,000 starts. Single‐family housing starts fell by 11.3% to 909,000 units (annualized).  HUD/Census says that about 1,553,300 housing units were started in 2022. which is down 3.0% from 2021’s total of 1,601,000 starts.

New home construction permits and completions.
New home construction permits and completions. Screenshot courtesy of census.gov.
New home construction permits and completions up to December.
New home construction permits and completions. Screenshot courtesy of census.gov.

Stats for Major US Metros

Interested in your local real estate market?  See the metro reports for Boston, Atlanta, New York, Philadelphia, Los Angeles, San Diego, Bay Area, Dallas, Denver, Houston, Chicago, and Miami. See also reports for smaller centers including Salt Lake City, Austin, Colorado Springs, San Antonio, Tampa, Seattle, and Manhattan.

This list from Zillow reveals US metro housing markets with the highest rise in price since before the steep housing market boom in 2022. Although some cities have suffered a steep drop in home prices, home sellers are still fetching an elevated price. Stats like these might help homeowners realize it might be a great time to unload their property in 2023.

While prices are dropping in many metros of late, they are continuing to climb in others.

City Home Price Home Price September 2022 Home Price September 2021 YoY % Change (Dec) % of Sales under list price Price growth last 16 months
Fort Lauderdale $528,353.00 $519,690.00 $409,320.00 22.50 66.8 29.08%
Jacksonville $312,639.00 $313,544.00 $251,575.00 17.10 56.9 24.27%
Nashville $450,487.00 $453,787.00 $363,787.00 15.20 56.4 23.83%
Miami $562,992.00 $555,524.00 $454,954.00 23.70 69.7 23.75%
Panama City $278,244.00 $275,751.00 $227,066.00 16.00 57.5 22.54%
Charlotte $397,154.00 $398,041.00 $329,624.00 14.70 53.6 20.49%
Anchorage $430,053.00 $423,811.00 $357,216.00 21.10 20.39%
Memphis $158,446.00 $158,079.00 $132,323.00 13.40 47.4 19.74%
El Paso $208,344.00 $203,527.00 $174,652.00 15.20 35.1 19.29%
Fort Worth $325,127.00 $326,330.00 $273,114.00 13.20 53.1 19.04%
Orlando $385,910.00 $386,208.00 $326,160.00 18.30 57.3 18.32%
Indianapolis $230,696.00 $227,483.00 $195,039.00 13.70 49.6 18.28%
Oklahoma City $190,568.00 $187,745.00 $161,939.00 12.90 47.7 17.68%
Tampa $416,722.00 $420,151.00 $354,801.00 17.50 60 17.45%
Raleigh $435,554.00 $449,661.00 $374,331.00 9.40 51.9 16.36%
Kansas City $232,155.00 $228,639.00 $202,780.00 10.50 43.6 14.49%
Columbus OH $242,726.00 $244,135.00 $212,778.00 10.10 39.4 14.07%
Tucson $325,077.00 $326,337.00 $285,647.00 10.30 51.9 13.80%
Atlanta $404,263.00 $404,082.00 $355,363.00 8.50 52 13.76%
Las Vegas $412,029.00 $429,786.00 $363,131.00 7.40 61.8 13.47%
Cleveland $111,195.00 $111,081.00 $98,551.00 10.10 47.4 12.83%
St Louis $178,602.00 $175,643.00 $159,391.00 9.00 37.7 12.05%
Houston $273,295.00 $272,430.00 $245,594.00 11.30 61.3 11.28%
Dallas $326,938.00 $331,963.00 $294,268.00 11.10 54.3 11.10%
Milwaukee $183,751.00 $179,527.00 $165,737.00 10.30 41.1 10.87%
San Antonio $297,568.00 $298,893.00 $269,271.00 10.50 52.6 10.51%
Philadelphia $246,115.00 $240,208.00 $226,799.00 7.10 54.8 8.52%
Honolulu $852,051.00 $862,598.00 $785,448.00 5.50 54.1 8.48%
San Diego $946,026.00 $952,312.00 $879,313.00 7.60 55.9 7.59%
New York City $782,365.00 $779,620.00 $728,185.00 5.80 68.5 7.44%
Denver $623,003.00 $625,777.00 $587,208.00 7.70 53.9 6.10%
Chicago $310,452.00 $312,097.00 $292,716.00 3.60 61.6 6.06%
Seattle $913,416.00 $933,352.00 $864,782.00 2.90 50.3 5.62%
New Orleans $283,906.00 $285,387.00 $269,163.00 5.50 67.7 5.48%
Boston $707,055.00 $715,601.00 $675,117.00 3.20 56.6 4.73%
Sacramento $490,537.00 $499,997.00 $469,121.00 4.00 46.9 4.57%
Phoenix $400,426.00 $411,429.00 $384,787.00 4.10 61.5 4.06%
Pittsburgh $227,771.00 $228,388.00 $220,993.00 2.00 55.8 3.07%
Portland $566,655.00 $567,867.00 $549,844.00 2.50 47.6 3.06%
San Jose $1,363,205.00 $1,382,000.00 $1,324,100.00 3.00 59.8 2.95%
Los Angeles $950,715.00 $971,301.00 $928,517.00 0.01 50.1 2.39%
Minneapolis $326,805.00 $327,586.00 $320,478.00 1.90 41 1.97%
Washington DC $667,932.00 $678,199.00 $666,059.00 -0.30 46.8 0.28%
Austin $619,096.00 $636,145.00 $618,641.00 0.10 73 0.07%
Oakland $917,583.00 $943,675.00 $937,871.00 2.20 24.1 -2.16%
San Francisco $1,438,754.00 $1,447,627.00 $1,510,848.00 -4.80 38.3 -4.77%

28 Key Factors Driving the Home Buy/Sell Decision this Spring

  1. strong economic recovery expected in 2nd half
  2. fear of missing out amidst record low housing supply
  3. millennials and even Gen Z’s forming new families and need a house
  4. homeowners have nowhere to go thus can’t sell
  5. home buyers want homes in more suburban and rural areas
  6. Americans who moved back to parents or with relatives will want their own place to live this year
  7. work from home expected to continue
  8. government will spend more stimulus money because they want to ensure the jobs and housing markets don’t stagnate
  9. Fed promised to keep interest rates down
  10. supply of homes making it unlikely many will be able to buy
  11. new home construction, material and land prices rising faster
  12. foreclosures may free up some homes for sale
  13. migration: work from home still driving buyers out of the cities for more room for a home office, backyard, space to relax
  14. migration: businesses moving out of high tax states to lower-tax states
  15. inflation plus money supply plus need for housing could inflate house prices severely
  16. buyers holding high-value stock portfolio’s could sell to buy a home
  17. buyers see a house as a potential rental income property
  18. many sellers want to get out of the city they live in for something new after a horrible pandemic period
  19. real estate is a preferred asset when cash, savings, and stocks can only go down in value
  20. cities and regions will still not allow housing development (NIMBYs) thus more demand for the limited available stock of homes
  21. homes are a safe haven (those renting saw how insecure their week to week lifestyles are where they could be left with nothing later in life, and wondering whether social security will even over their bills)
  22. speculation (real estate investors including the new crowdfunding buyer who can take more risk don’t see a big downside to real estate and are willing to pump money in for houses or rental properties)
  23. as employment grows there will be more demand for homes in 2021, 2022 and for 5 years ahead
  24. states such as Texas, Florida, Arizona drawing new residents (climate, jobs, business growth, low taxes)
  25. Los Angeles, San Francisco, New York losing residents (cost of living, taxes, failing economies)
  26. global economic growth will hit 4% in 2021 (world bank report)
  27. 225,000–500,000 homeowners could face foreclosure this year
  28. homelessness in the major cities will become a negative factor driving people out of the cities and shunning buyers

All markets, including Los Angeles, San Diego, Denver, New York, Manhattan, Dallas, Boston, Philadelphia, Atlanta, Chicago, Austin, San Antonio, Salt Lake City, Tampa and Miami, have felt the crush of demand and much higher home prices. Florida is booming while California’s housing market forecast is not looking strong.

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