If you’re hoping that homes will get more affordable next year, don’t hold your breath.
That’s the takeaway from real estate information service Realtor.com’s 2023 housing market forecast.
The report predicts the 30-year fixed mortgage rate will average 7.4% next year, with an early climb followed by a retreat to 7.1% by year-end. The rate averaged 6.58% in the week ended Nov. 23, according to Freddie Mac
Meanwhile, the report anticipates existing home sales prices will climb 5.4%. That would represent a shift of the current trend. The median price for existing-home sales totaled $379,100 in October, down 1.5% from $384,800 in September and 8.4% from a record high of $413,800 in June.
Putting the mortgage rate and home-price predictions together, the report sees the monthly cost of financing the typical for-sale home averaging more than $2,430 in 2023. That represents a nearly 28% increase over 2022, and is roughly double the typical payment for buyers in 2021.
This dynamic will result in a drop of 14.1% in existing home sales next year to 4.53 million, the lowest level since 2012, the forecast said.
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Housing Market Pace
“Compared to the wild ride of the past two years, 2023 will be a slower-paced housing market, which means drastic shifts like price declines may not happen as quickly as some have anticipated,” said Danielle Hale, chief economist for Realtor.com.
“It will be a challenging year for both buyers and sellers…. With mortgage rates continuing to climb as the Fed navigates the economy to a softish landing, higher costs will lead to fewer closings.”
One thing that will help buyers next year is an increase in supply, the report said. The number of existing homes for sale will increase 22.8%, “as the inventory refresh that began last summer accelerates,” the report predicted.
Renters’ Plight
In any case, renters may have it even worse than buyers next year. The report forecasts a 6.3% ascent for rents, outstripping the gain for home prices.
“U.S. renters will continue to face challenges from limited supply and excess demand that will keep upward pressure on rent growth,” Hale said.
“Rising housing costs, stemming from a 20-year high mortgage rate and slowing new construction, may keep many potential homebuyers in the rental market longer and thus fuel the already high rental demand.”
Looking at geographic trends, “rental demand may be stronger in urban areas within big metropolitan areas, a departure from both recent trends and what is expected in the for-sale market,” Hale said.
“Unlike the recent trend of renting in the suburbs to take advantage of remote work to lower housing costs, the premium on urban rentals has shrunk sufficiently to draw people back to big cities to enjoy their diverse social and cultural offerings.”
