BAM’s Key Details:
- Lawrence Yun, NAR’s chief economist, shared his predicts for 2023 and 2024
- Yun expects low inventory will prevent a steep decline in home prices
- He also predicts a strong rebound of the housing market in 2024
Here’s what you need to know.
Low inventory will prevent a freefall in home prices
Given the backdrop of high inflation, cooling buyer demand, and mortgage rates more than twice what they were at the beginning of 2022, Yun expects that severely limited housing inventory will prevent steep declines in home prices for most of the U.S. in 2023.
For most parts of the country, home prices are holding steady since available inventory is extremely low. Some places are experiencing price gains, while some places, most notably in California, are seeing prices pull back.
Today’s market is fundamentally different from the Great Recession
But according to Yun’s analysis, today’s market conditions are fundamentally different from those experienced during the Great Recession.
Housing inventory is about a quarter of what it was in 2008. Distressed property sales are almost non-existent, at just 2%, and nowhere near the 30% mark seen during the housing crash. Short sales are almost impossible because of the significant price appreciation of the last two years.
The housing market’s impact on the nation’s economy
Yun pointed out the connection between the rate at which mortgage rates climbed in 2022 and the nation’s overall economic performance.
The slide in sales and home building has [brought] down GDP. If the housing market was stabilizing and not declining, GDP would be positive.
According to Yun, signs point to a topping out of mortgage rates, especially since October’s consumer price index showed inflation going up less than expected. He was, however, concerned about the gap between mortgage rates and the federal funds rate.
The gap between the 30-year fixed mortgage rate and the government borrowing rate is much higher today than it has been historically. If we didn’t have this large gap, mortgage rates wouldn’t be 7%, they would be 5.8%. A normal spread would revive the economy. If inflation disappears, then we’d see less anxiety within the financial markets and lower interest rates, which would allow owners to refinance.
Predictions for 2023 and 2024
Looking ahead to 2023, Yun expects home sales will decline by 7%, and the national median home price will increase overall by 1%. That said, some markets will see price gains while others will see declines.
Looking even further ahead to 2024, Yun predicts the housing market will rally with a 10% surge in home sales and a 5% jump in the national median home price.
Top takeaways for real estate agents
As a real estate agent, it makes sense to keep the latest predictions from NAR’s economists handy. And whenever possible, back up those words with verifiable data to help your clients and community see the full context surrounding these expert predictions.
Show prospects that their concerns about the housing market or about buying or selling a home are a high priority for you—so high, you’re willing to go above and beyond to get them the answers they need.
And once you have their number, ask them if they would allow you to keep them informed about any changes or opportunities in your market. The more you follow up to keep them educated, the more they’ll grow to trust you.