Where the Top Experts say the Housing Market is heading in 2023
For the first time in over a decade, worldwide residential real estate has entered into a period of falling home prices. In fact, $1.37 trillion in mortgage holder equity vanished in the third quarter of 2022 -- the sharpest single-quarter decline, by dollar value, since 2000. According to the mortgage technology firm Black Knight, California accounted for more than half of the national decline in equity.
Millennials and first-time home buyers are some of the hardest hit.
According to the National Association of REALTORS, between June 2021 and June 2022, the typical first-time homebuyer was 36 years old, the highest median age since the National Association of Realtors began surveying buyers in 1981. And during that same period, first-time buyers accounted for only 26% of all home purchases, the lowest percentage ever.
In December, U.S. existing home sales slowed for the 11th consecutive month as inflation and higher mortgage rates lowered consumer demand.
It’s not all doom and gloom!
While the market certainly experienced some major trouble during 2022, there are signs of hope on the horizon – especially for buyers. According to Axios, who conducted a nationwide poll among realtors, most felt that while mortgage rates were making borrowing more expensive, buying conditions would likely make 2023 an increasingly buyer-friendly housing market.
"December was another difficult month for buyers, who continue to face limited inventory and high mortgage rates," NAR chief economist, Lawrence Yun, said in a statement. "However, expect sales to pick up again soon since mortgage rates have markedly declined after peaking late last year."
Even sellers may have something to celebrate.
While many in the media are reporting doom and gloom, most mortgage holders in the U.S. still have more equity in their homes than before the COVID-induced housing boom. If you close your eyes at the beginning of the pandemic and just kind of live there, and then look at your home valuation today, I think you'd be very happy," says Andy Walden, Vice President of Enterprise Research at Black Knight.
Where are things heading in 2023?
According to Real Estate expert Steven Thomas, expect a sluggish start, with buyer demand increasing throughout the year.
"More homeowners will opt to sell, and the active inventory will rise. Buyer demand will increase as well with the holidays in the rearview mirror, it always does regardless of the pace of the market. Further fueling an increase in demand is that mortgage rates have dropped from over 7.25% in October and November to just above 6% today. Expect home values to continue to fall until mortgage rates drop to 5.5% or below. The direction of the housing market is predicated on the direction of mortgage rates and home affordability. As rates drop, affordability will eventually improve enough to instigate more demand. Mortgage rates will slowly fall as inflation gradually comes back down to earth. This is a process that does not occur instantly and just as it took a while to rise to its current level, it will take a while to substantively drop."
Thomas had a warning for both buyers and sellers. For sellers he says, "If you are holding out for the Spring Market in anticipation of a quick sale and a price higher than the last comparable sale, that simply will not happen. Instead, sellers will be looking at a much more sluggish market with muted demand and buyers taking their time to purchase. Proper pricing is crucial to find success."
For Buyers, Thomas warns: “While home values may be falling right now, lowball offers are a waste of everybody's time including your own. Distressed sellers, foreclosures, and short sales are NOT components of today's market. There is a real lack of panic selling. Most sellers do not have to sell, so there will not be major ‘deals’ like there were during the Great Recession."
