2023 winter housing market predictions
Note: This story was originally posted by Bankrate.com by TJ Porter & Michele Petry on January 18, 2023.
The year is quickly ticking down, and we are fast approaching the transition between autumn and winter. That makes now a perfect time to forecast how the real estate market might shake out next season and into early 2023.
Will mortgage rates continue to escalate? Is the slow but steady drop in home prices expected to persist? Is a housing market crash likely? We reached out to several experts to get their housing market predictions for late 2022 and early 2023.
Recent housing market updates: Home prices and market trends
Overall, the housing market is in a clear downturn. Home prices peaked nationally in June 2022, when the S&P Case-Shiller U.S. National Home Price Index reached over 318 points and the National Association of Realtors’ median existing-home price for all housing types reached a new high of $416,000. The index dropped to around 303 points as of August (the most recent listing), and median existing-home sale prices have since dropped to $379,100.
A major reason is the steady climb in mortgage interest rates, fueled in part by the Federal Reserve’s decision to raise rates multiple times across 2022. At its November meeting, the Fed increased interest rates for the sixth straight time. It has been aggressively spiking rates in an effort to curb inflation, and the real estate market has suffered accordingly. Rising mortgage rates equate to less interest from home buyers and greater pressure on sellers to reduce their prices.
“The last few months of 2022 already reflect sales slowing, fewer people applying for mortgages and a larger percentage of people falling out of contract — meaning backing out of an executed contract to buy a property,” says Suzanne Hollander, a real estate attorney and professor at Florida International University in Miami. Per Redfin data, 60,000 deals were called off nationally in September 2022, representing 17 percent of the homes that went under contract that month.
L.D. Salmanson, CEO of real estate data firm Cherre in New York City, notes that we are seeing fewer transactions and increasing days on the market, indicating a price gap between buyers and sellers. “As interest rates rise, buyers are deterred from the housing market and mortgage applications are extremely low,” he says. “History tells us that this is temporary: People are losing their jobs while still carrying mortgages at variable rates. This will force them to return to reality and sell at lower prices.”
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https://www.bankrate.com/real-estate/housing-market/california/
