BAM’s Key Details:
- Industry leaders have weighed in on the 2023 housing market with their predictions
- This roundup includes highlights of the BAM articles on each housing market forecast
- While mortgage rates are still high, experts agree today’s housing market is radically different from 2008, and the recession in 2023 is likely to be brief.
So, this isn’t the real estate industry’s version of a Magic 8 Ball—let alone a crystal-clear glimpse into the near future—but it’s the closest we’re likely to get.
You could ask any of the experts in this roundup, “Will we have a recession in 2023?” the general consensus would be, “Signs point to yes.”
The fuzziness is in the details.
- Will housing prices continue to rise?
- Will mortgage rates go down?
- Will the Fed raise the federal funds rate again?
BAM’s recent articles on forecasts from Fannie Mae, Redfin, Zillow, NAR, and Realtor.com® go into more detail on their predictions for 2023.
Consider this your highlight reel.
Redfin’s 2023 Housing Market Forecast
Redfin made 12 confident predictions for the 2023 housing market. Here are the highlights:
- Home sales will drop to their lowest level since 2011
- Mortgage rates will decline, ending the year below 6%
- Home prices will decline for the first time in 10 years—but, despite the brief dip for some into negative equity, the U.S. will avoid a wave of foreclosures
- Rents will fall, and many will continue renting indefinitely
- Builders will focus more on multifamily rentals
Zillow’s 2023 Housing Market Predictions
Zillow made predictions on the following five trends for 2023:
- The Midwest will take center stage, thanks to affordability and inventory
- Buying a home with friends or (non-spouse) relatives will gain momentum
- The affordability crisis will stabilize
- 2023 will see a surge in first-time landlords
- New construction will focus more on rentals
Americans finding ways to make payments on a roof over their heads is going to drive the market next year. Where costs are lower, we’ll see healthier sales and inventory levels. If rent is less expensive than a new mortgage, we’ll see increased demand for rentals — something builders and landlords understand. Affordability is going to be the biggest factor in housing for 2023, but there’s room for optimism on that front if mortgage rates recede.
Realtor.com®’s 2023 Housing Forecast
According to Realtor.com®, housing prices are not coming down in 2023, and rents will continue rising—both predictions that run counter to those made by Redfin. Here are the highlights:
- Average mortgage rates at 7.4% — with hikes in early 2023 followed by a slight dip to 7.1% by the end of the year
- Rents—up 6.3% year-over-year—will outpace housing prices
- Home sale prices won’t come down on a large scale, but price growth will slow to a single-digit yearly rate (+5.4%) for the first time since 2020
- Existing homes for sale will increase (+22.8% year-over-year) as the surge in inventory that began in summer of 2022 accelerates
- Home sales will drop by 14.1% year-over-year to 4.53 million—the lowest since 2012
Fannie Mae’s (Updated) 2023 Housing Market Forecast
Fannie Mae’s ESR Group has the following expectations for next year’s housing market:
- Economy—The first quarter of 2023 will see a modest recession
- Interest rates—The Federal Open Market Committee (FOMC) will again raise the federal funds rate, which will top out at about 5.0% in early 2023
- Inventory—As fewer existing homeowners put their homes on the market, first-time buyers may increasingly turn to new construction
- Housing sales are expected to hit a trough in Q2 2023 before beginning to rebound.
- Homebuilders will offer more generous buyer incentives to move available inventory–-another factor giving new home sales an edge over existing home sales in the coming year.
Source: Fannie Mae
NAR 2023 Forecast for Residential Real Estate
At their fourth annual virtual Real Estate Forecast Summit, NAR Chief Economist Lawrence Yun, along with a team of expert panelists, shared their observations and insights into the 2023 housing market.
Starting with NAR’s year-end slides, reviewing 2022, Yun shared the following predictions for the coming year:
- 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 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.
Lawrence Yun’s 2023 Housing Market Predictions (NAR)
Lawrence Yun is a prominent voice in the industry—one that’s worth paying attention to. His forecasts often become focal points in BAM podcast episodes—most recently on The Walk Thru.
Here’s what he has to say about 2023:
- Low inventory will prevent steep declines in home prices for most of the U.S.
- Signs point to a topping out of mortgage rates, especially as inflation eases.
- Home sales will decline by 7%, and the national median home price will increase overall by 1%.
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.
RE/MAX, LLC
Nick Bailey, president and CEO Of RE/MAX, offers one of the more optimistic forecasts for the coming year.
Whatever happens in the housing market, there will always be consumers getting married, having babies, divorcing, relocating to care for ailing family members—or pursuing career opportunities.
For these people, buying or selling is less about interest or mortgage rates and more about pressing personal needs—and whether they can afford a home that meets those needs.
I’m optimistic that 2023’s spring selling season will be a bright spot as levels of inflation get more under control. There will still be extreme demand as new construction just can’t get out of the ground fast enough, and the Millennial home buyers, who make up a huge demographic, are primed to make their move. According to a recent survey conducted by RE/MAX in partnership with SWNS Media Group, 84% of Gen Z, 79% of Millennials and 61% of survey respondents 77 or older plan to buy a house or condo in the next few years. In my opinion, 2023 will be a better year for housing than many people think, especially because we’ll no longer have year-over-year comparisons to 2021 – an historic outlier that made 2022 seem less than what it really was.
Top takeaways for real estate agents
Granted, not all the experts agree on particulars. Will housing prices decline or continue rising? Will rents fall, attracting more sidelined buyers, or will they outpace home prices?
Putting national housing market forecasts aside, for now, look at what your local market is telling you. What are you seeing in your area? What advantages have you found for your clients that they didn’t have during the atypical market of the pandemic buying frenzy?
Focus on what your clients need to know to make the best decisions in the here and now.
