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Housing Market Predictions For 2023

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We are turning the corner in 2022 and quickly heading into the new year. So now is the perfect time for him to predict the real estate troubles of 2023. housing prices — With the brakes on and the heightened uncertainty felt across the market, many homeowners, prospective sellers and prospective buyers are nervous about next year.

And for good reason.At the time of this writing, the average interest rate for a 30-year fixed mortgage is 7.04 percentInflation is astonishing 8.2 percent. And second-hand home sales declined 1.5 percent According to the National Association of Realtors, the seasonally adjusted annual rate is 4.71 million units, which means that existing homes are selling at the slowest pace in a decade.

We reached out to several industry experts, each with interesting predictions and predictions about where mortgage rates, home prices, buyer competition, housing supply, sales activity, and home affordability are headed in 2023. provided a forecast. Read their ratings and predictions.

With interest rates nearly doubling from their lows in early 2022, it’s a fair assumption that housing financing costs won’t come down this year. But what about the whole year 2023? Is there light at the end of this dark tunnel?

Some say no. “Continued inflation, rising interest rates across the board, the possibility of a recession and geopolitical tensions will push 30- and 15-year mortgage rates higher through 2023, with short-term He warns that the two rates will come closer as the risks rise.” Awning.com strategist and professor of economics and finance at the City University of New York, he expects his 30- and 15-year benchmark mortgages to average 8.75% and 8.25%, respectively, by 2023. I am predicting.

Robert Johnson, Professor of Finance at Hyder College of Business, Creighton University, shares some of these observations.

“By the end of 2023, financial market participants expect the Fed to raise its target federal funds rate by 175 to 200 basis points from current levels. That translates to roughly 8.50% and 7.70%,” he says.

Rick Sharga, Executive Vice President of Market Intelligence at ATTOM Data Solutions, who conducts the analysis, said: real estate and property data are more promising. He estimates that interest rates for 30- and 15-year loans will peak at around 8% and 7.25% in early 2023, and then “begin gradually over the course of a year, to 6.0% and 5.25% ranges, respectively. I’m assuming it will fit in. This is entirely dependent on the Fed’s ability to keep inflation in check and moderate its aggressive rate hikes.”

Three different avenues of interest

Meanwhile, Nadia Evangelou, a senior economist and director of real estate research at the National Association of Realtors, sees three different interest rate scenarios taking place next year.

“In Scenario 1, inflation remains high, forcing the Fed to hike rates repeatedly. , with inflation slowing gradually and mortgage rates stabilizing between 7% and close to 7.5% in 2023. In Scenario 3, the Fed repeatedly raises rates, curbing inflation and The economy is going into recession, which could bring rates down to 5%,” she explains.

Each of Evangelou’s three mortgage rate scenarios has a significant impact on home sales. In either case, sales will decline — it’s just a matter of how much.

“In Scenario 1, higher interest rates could reduce home sales by 10% or more next year,” she continues. “In scenario 2, home sales drop by 7% to 8% for her. And in her third scenario, home activity could also drop by 15% or more for her.”

Our other experts agree: slowdown in home sales Shaga expects existing home sales to slow to 4.5 million units in 2023 and new home sales to about 600,000 units.

Listings no longer move at a lightning pace, either. “Market days have recently returned to more normal levels, and as the market continues to cool, he could be closer to 30 days or more in 2023,” he says.

Sirshkov sympathizes with the sentiment. “The average number of days on the market will double to triple his current level,” he points out.

Interestingly, Evangelou predicts that “home prices will not fall in 2023” because inventories are low. “We expect prices to remain relatively flat, rising just 1%.”

But Mr Johnson said rising interest rates would definitely It negatively impacts home values ​​and pricing. “There will be a soft real estate market with prices below current levels,” Johnson said.

that’s not great news for sellersbut welcome news for house hunters.

“There are a lot of potential buyers waiting patiently to enter the market. all cash Scott Krinsky, partner in the residential banking division of Manhattan real estate law firm Romer Debbas, explains:

House prices at the national level are almost certain to fall at least moderately, perhaps between 5% and 10%, Sharga said.

“Some of the more expensive markets may see more declines. It should help prevent a decline,” continues Sharga.

for two years it was seller’s marketWill 2023 favor buyers or sellers in most markets? Greg McBrideBankrate’s Chief Financial Analyst, said, “Affordability issues and economic uncertainty will push down homebuyer demand, leaving a limited inventory of available homes for sale. Rather than tipping, it will continue to be a more balanced market.”

Klinsky expects leverage to vary nationally by market type.

“The pandemic has sparked a new surge of bidding wars in suburban and smaller markets, likely due to the need for more space and the increased flexibility of remote work across the country.” says Krinsky. “Now that many offices and businesses are at near full capacity and fully operational, we expect the larger market to return to pre-pandemic levels and see increased demand there.”

Johnson, meanwhile, expects sellers to have fewer cards. “Next year will be a buyer’s market, as many reluctant sellers waiting for the market to turn around are likely to capitulate, increasing housing supply,” he says.

A housing shortage has sparked a frenzied market in recent years. Experts, however, are divided on 2023 housing inventory forecasts.

“Before the 2008 housing crash, inventories peaked at about 13 months’ supply, which is double what we see in a healthy market,” says Sharga. “We currently have three months of supply, which is about half of what we need. Existing housing inventories should remain low as replacements for A significant increase is unlikely.”

However, some predict that supply will increase next year. “Housing inventories will continue to rise throughout 2023 as homes become unaffordable due to high interest rates,” Shirshikov believes.

Will housing remain financially out of reach for many buyers next year, or will things turn around for buyers?

“If easing inflationary pressure A significant reduction in mortgage rates next year will ease some of the burden for buyers, but only marginally,” McBride explains. “Prices have remained fairly stable, with prices more than 40% higher than pre-pandemic in many markets.”

“House prices are not going to fall proportionally,” Sirshkov thinks. “Price declines are not enough to offset rising interest rates and their contribution to monthly interest rates. [mortgage] payment. “As a result, housing may not even look affordable,” he says.

Mr Johnson agrees that the effects of rising mortgage rates and falling house prices in 2023 are likely to offset each other. It won’t change.”

2023 housing market conclusion

Most professionals agree when it comes to putting the real estate market in perspective next year.

“The housing market will remain weak in 2023 with lukewarm demand and limited salable inventory,” McBride predicts. However, “if inflationary pressures ease, mortgage rates could drop significantly next year.”

“The hope is that interest rates will start to bounce back as demand and supply within the housing market normalize,” Klinsky agrees. “Until this happens, those who cannot afford to pay the cost of borrowed money will have to wait. We may have to accept the fact that the low-interest funding window that opened in 2019 has closed.”

However, if mortgage rates remain less volatile, “means less borrowers will pursue purchase loans and interest rate-based refinancing activity will continue to decline,” Sharga repeats. “We may see more home equity loans and home equity lines of credit later this year as more homeowners stay in place.” modification may be in.

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