The housing market has seen its fair share of ups and downs in the last couple of years. As such, both buyers and sellers are eager to learn what to expect in the world of real estate in 2023.
Specifically, many are predicting that house prices will drop. This is due to a combination of factors, including a cost of living that’s still high; inflation and mortgage rates that are continuing to climb; and a slowdown in the starts of new, single family home construction. And, while it’s not certain that we’ll see a buyer’s market nationwide, a modest decline in prices is likely, according to Fixr.com’s Housing Market Predictions report.
Of course, when it comes to knowing what the future holds for the housing market, our best bet is to listen to forecasts from top experts at the forefront of the industry. Here’s what some of them are predicting.
House Prices Will Go Down — But Not in All Areas
Mortgage and interest rate increases are set to slow demand somewhat as housing becomes unaffordable for many. This will then cause house prices to drop.
Robert Dietz, chief economist at the National Association of Home Builders (NAHB), said that his organization was forecasting home price declines through the end of 2023. In fact, he predicts that house prices could fall as much as 10% from peak in typical markets. Meanwhile, Rayan Rafay, CFO and COO of Fraction, believes that we’ll see a general “flat to modest decline in home prices” across the country.
This is good news for buyers who may have been recently priced out of the market. Garrett Derderian, director of market intelligence at Serhant, thinks that Mountain West and West Coast homes are most likely to depreciate at around 10% to 20% at most.
However, that may not be the case for all areas of the country. For instance, price stability is expected in East Coast markets (like New York City) due to the “limited number of turnkey homes for sale,” per Derderian. He said the same can also be said for in-demand markets, like Florida, which “are unlikely to see a major pullback in values.”
Single Family Home Construction Expected to Slow, While Build-to-Rent Picks Up the Pace
As one segment is primed to continue to boom, the other is set to take a temporary hit. In particular, build-to-rent homes have seen a major rise in numbers in recent years — and that number will only increase further. For perspective, Dietz reported that 10% of all home construction were build-to-rent homes in the second quarter of 2022.
At the same time, new single family home construction is set slow in 2023. That’s because starts were already down already in 2022 — and this downturn is predicted to continue. Supply chain issues also rumble on, as well as labor shortages. All of these factors have led to lower demand, partly due to the volatile building materials market. That said, Dietz stated that the NAHB was still predicting a housing rebound in 2024.
Wider Economy Will Feel the Heat
As the housing market continues to navigate its way out of the resulting fallout from the pandemic, the wider economy is expected to continue to feel the pressure. To that end, high inflation and interest rates will affect people across the nation.
“Economies and real estate markets will be deeply affected for years,” said Baron Christopher Hansen, real estate consultant at Coldwell Banker Realty.
Rafay agreed: “Economic stagnation will be difficult to quickly exit from.”
Plus, ongoing issues around labor shortages will continue to affect both real estate, construction and the economy as a whole.
Temporary Housing Downturn Expected
While home sales are predicted to fall by as much as 7%, no major housing market crashes are expected. Although 2023 might be slightly better for buyers than the years since the pandemic began, many experts are predicting a housing market rebound for 2024.
Adam Graham is an industry analyst at Fixr.com. He analyzes and writes about the real estate and home construction industries, covering a range of associated topics. He has been featured in publications such as Better Homes and Gardens and The Boston Globe, and written for various outlets including the National Association of Realtors, and Insurance News Net Magazine.