BAM’s Key Details:
- NAR held its fourth annual virtual economic and real estate summit to review 2022 and give their outlook on next year’s economy and real estate market
- Lawrence Yun forecasted that 4.78 million homes will be sold and home prices will remain stable in 2023
- Housing economists Danielle Hale, Danushka Nanayakkara-Skillington, Lisa Sturtevant and Selma Hepp also joined Yun to weigh in on market indicators for 2023.
On December 13, 2022, Dr. Lawrence Yun hosted NAR’s fourth annual virtual Real Estate Forecast Summit to review 2022 and provide a detailed forecast on the economy and real estate market for 2023.
According to his forecast, 4.78 million existing homes will be sold, home prices will remain stable, and Atlanta, GA will top the list of the ten real estate markets to watch in 2023.
After reviewing the slides, Dr. Yun invited four industry experts to share their own observations and insights.
NAR’s top predictions for 2023
Referencing the slides at the beginning of the summit, Dr. Yun revealed the following NAR predictions for the 2023 residential housing market.
- Home sales— will decline by 6.8% compared to 2022 (5.13 million)
- Median home price— will rise to $385,800 – an increase of just 0.3% compared to this year ($384,500).
- Rent prices— will increase by 5% in 2023, following a 7% increase in 2022.
- Foreclosure rates— will stay at historically low levels in 2023, comprising less than 1% of all mortgages.
- U.S. GDP— will increase by 1.3%, about half the typical historical pace of 2.5%.
- Mortgage rates— After topping 7% in late 2022, the 30-year fixed mortgage rate will settle at 5.7% as the Fed slows its pace of rate hikes to control inflation.
- Hottest markets— Atlanta, GA, tops the list of the ten real estate markets to watch in 2023 and beyond.
One of the slides featured a table contrasting current market conditions to those from the last housing crash, making the point that a similar crash is unlikely to happen, given the changes in the market since 2008.
Even with the recent slowing in home price growth, NAR expects foreclosures to remain at or near record lows.
Half of the country may experience small price gains, while the other half may see slight price declines. However, markets in California may be the exception, with San Francisco, for example, likely to register price drops of 10–15%.
He also sees the potential for mortgage rates to go even lower than the projected 5.7%, especially as the gap narrows between mortgage rates and 10-year Treasury yields.
Top real estate markets to watch in 2023
In the search for the “new Austin” — or the “new Salt Lake City” — NAR selected the 10 real estate markets to watch in the coming year, based on how they perform compared to the national average on the following economic indicators:
- Better (than average) housing affordability
- Higher numbers of renters who can afford to purchase a median-priced home
- Stronger than average job growth
- Faster growth of jobs in the information industry
- Higher shares of the information industry in respective local GDPs
- Migration gains
- Percentage of workers teleworking
- Faster population growth
- Faster growth of active housing inventory
- Smaller housing shortages
Here’s the top 10 list:
- Atlanta-Sandy Springs-Marietta, Georgia
- Raleigh, North Carolina
- Dallas-Fort Worth-Arlington, Texas
- Fayetteville-Springdale-Rogers, Arkansas-Missouri
- Greenville-Anderson-Mauldin, South Carolina
- Charleston-North Charleston, South Carolina
- Huntsville, Alabama
- Jacksonville, Florida
- San Antonio-New Braunfels, Texas
- Knoxville, Tennessee
The demand for housing continues to outpace supply. The economic conditions in place in the top 10 U.S. markets, all of which are located in the South, provide the support for home prices to climb by at least 5% in 2023.
NAR Summit panelists
After going through the slides showing the latest NAR research on housing market metrics, Dr. Lawrence Yun introduced the summit panelists:
- Danielle Hale — Chief Economist, Realtor.com®
- Danushka Nanayakkara-Skillington — AVP Forecasting & Analysis, National Association of Home Builders (NAHB)
- Lisa Sturtevant, Ph.D. — Chief Economist, Bright MLS
- Selma Hepp, Ph.D. — Executive, Research & Insights, Interim Lead of the Office of the Chief Economist for CoreLogic®
Starting with Realtor.com®’s Danielle Hale, here are some of their insights on the 2023 residential housing market and its key indicators:
We are forecasting price growth in 2023. And it’s not to say we don’t think prices will slow; we think price growth will be half what it was in 2022…and there may even be some months of year-over-year decline. But on the whole, we expect prices to be higher in 2023 than in 2022. Because a lot of the shortage issues that Lawrence presented some charts and data on are still going to be present in the housing market.
We do expect that more homeowners/sellers are going to participate in the housing market, and, perhaps more importantly, that when they put their homes up for sale, it’s going to take them longer to sell their homes in 2023. Because buyers are grappling with these affordability factors, it’s still going to be expensive to buy a home, and that’s going to mean they’re going to be a bit more cautious in making decisions. And the increase in homes for sale is going to bring that balance that gives them more time to make decisions.
On the whole, because of these conditions, we expect home sales to pull way back in 2023, but we do think they’ll start to grow, perhaps in the second half of the year, as mortgage rates get to a point of stability.
Taking into account that 75% of construction is done by smaller builders, we’re expecting a real crunch time for next year. Publicly-traded companies might do better than the smaller builders…but I think the single-family market is definitely going to hurt next year.
Luckily, lumber prices have come down…but the other components like gypsum, steel, concrete, they’re up, too, double digits compared to pre-COVID levels. So, the aggregate cost of construction is up 14% from last year.
In 2023, there’s going to be a lot of variability in how these markets are adjusting. And I think there’s a lot of resetting of expectations both on the part of buyers and sellers. So, looking ahead, our forecast for median price at the national level to be pretty flat year over year. But there’s a lot of variation…There’s a lot going on in the market, and there are a lot of big negative numbers that are getting reported, and it’s important to remember that things went up so quickly and, even if they do come down, we’ll still be ahead of where we were back before the pandemic hit.
I do think home prices will vary across the country; the rate of growth, the rate of decline will depend on the region. But nationally, I do think home prices will level off in 2023…Another report we released last week is our ‘Negative Equity Report,’ on how much equity people have in their home. And we did see a decline in that average equity on a year-over-year basis simply due to decline in home prices in some of the markets. But what we also saw was an increase in the number of homes that are underwater…And that, I think, weighs on consumers’ confidence and their decision to enter the market at this point.
Top agent takeaways for 2023
Given the projected decline in home sales and with prices holding steady or rising compared to last year, agents in the coming year will need to hone their skills, not only in negotiating but also in prospecting and communicating with their clients.
Being a knowledge broker with your finger on the pulse of the local market—as well as a constantly evolving understanding of how the market works—will be critical to your growth in the coming year, as well as your clients’ satisfaction (and referrals).
Knowing what’s happening at a national and local level is just part of being the agent your clients and community need.
