The housing market is showing more signs of the rush to buy a home, and the historically low mortgage rates are over. Here’s what real estate experts think will happen in 2023 as 2022 comes to a close.
Danielle Hale, Realtor.com chief economist: After a few years of being a clear seller’s market, the housing market in 2023 might feel more like a market for no one. There will be 22.8% more houses for sale, which is good for people looking to buy. But most of the increase will come from homes taking longer to sell because they cost more.
The national median price of a home for sale is expected to go up by 5.4% more in 2023, which is less than half the increase in 2022. Still, the high prices mean that if a homeowner wants to sell and can find a buyer, they will probably have a lot of equity after the sale.
Overall, though, home sales will be 14.1% lower than in 2022, which is a big drop. This is because both buyers and sellers will avoid a housing market and the economy that is always changing. So, the number of homes sold in 2023 will be about the same as the rate in late 2022.
Many people who want to buy their first home in 2023 will only be able to do so 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.
Even though more multifamily homes are being built to help meet the growing demand for rentals, the median rental price is expected to go up by 6.3% across the country. Renters who want to save money in the coming year might want to move farther into the suburbs.
The still-strong job market will keep incomes growing faster than the 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 topping 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. In these areas, where homes are still affordable, the slow and steady real estate markets will be the stars in 2023. Because of this, they will be better able to deal with affordability issues in the coming years.
Bob Pinnegar, president and CEO of the National Apartment Association: Finding long-term, responsible solutions to our country’s housing crisis will still be a top priority in the new year. Our country needs more affordable housing because supply and demand are out of balance in a scary way. We need to build 4.3 million new apartments by 2035 to solve this problem.
Economic outlook for the housing market
In terms of the economy, problems with the supply chain have started to improve, and we hope they will continue to improve in the coming year. Even though there are jobs, the job market is tough 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 coming up with 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 breakdown of the accommodation they already have. As these policies continue to be discussed, the rental housing industry will keep pushing for responsible solutions, like bringing back Section 8 and removing barriers to building apartments, that will solve long-term problems with affordability.
Nick Bailey, the CEO and president of RE/MAX, LLC: One thing I know for sure about the housing market in 2023 is that millions of homes will still be bought and sold by Americans, no matter how the economy is doing as a whole.
When people talk about the health of the housing market, they usually look at it from an investor’s point of view. Will the market stops falling, or have we reached its peak? That’s a good conversation to have, but the truth is that people get married, break up, move to take care of elderly relatives, move for job opportunities, and so on every single day.
And for these 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.
Senior economist at LendingTree, Jacob Channel: People who want to buy a house will still have a hard time in the housing market. Even though mortgage rates may stabilize, prices may go down, and buyers may be able to negotiate with sellers more in 2023 than during the pandemic, buying a home will take work. But on the other hand, because rates are high and supply is low, many people will still need help to buy a house.