In recent months, there are, increasing pressure on the housing market, especially after home prices hit a high record. But the mortgage rates are declining in the past few weeks, and many economists forecasted home prices will continue to decline slowly through 2023.
Moreover, the overall housing supply is limited compared to the demand, and those who purchased homes in the last years at low mortgage rates are residing there. This limited inventory is keeping the prices afloat from declining further. Yet, homes are not affordable, especially for first-time buyers.
These elements are clear signals that low mortgage rates and home-buying turmoil came to an end. As 2022 is near the end, here is what we can expect for the home market in 2023.
2023 Forecast of the Housing Market
Yes, it is true that after a great couple of years the housing market is slowing down. The reasons can be many, from high inflation to geopolitical apprehensions, abrupt interest rates, etc. The increasing mortgage rates are still more compared to what they were at the start of the year 2022.
However, the higher housing costs have taken a toll on all home buyers across the globe as mortgage applications have hit rock bottom as per Mortgage Bankers Association (MBA).
As per Lawrence Yun, “The total existing home sales dropped by 5.9% from September to October and the ninth consecutive month showing the decline in sales.”
Lawrence Yun added that all these could turn around as the mortgage rates decrease after peaking in mid-November, making home sales hit bottom in the current housing market cycle.
see also: Is it a Good Idea to Buy Real Estate in India Despite Rising Prices?
2023 Predictions for Housing Inventory
Since the 2008 housing crash, the construction of new homes has plunged, resulting in a low housing inventory. It has recovered partially. Even the housing supplies are heightened both in demand and prices, which eventually makes the home prices higher.
Lawerence Yun said the inventory levels are still low compared to the demand, due to which some homes are for sale and are receiving multiple offers.
According to NAR (National Association of Realtors) the sales pace at present, inventory is at a 3.3-month supply.
Further, executive vice president of ATTOM Data, Ricky Sharga added that these inventories are even half of what we normally see. Further, there are lined-up demands per demographic trends waiting to be answered. However, the slow construction is also limiting housing supplies.
The final conclusion is that we are still running at only half of normal levels of foreclosure activity. These things will be coming at normal levels soon in mid-2023. It also depends on how the recession works. However, the existing home market prices in 2023 are predicted to decrease in both high-price regions and where home values skyrocketed the most.
