SANTA CLARA, Calif. — (By Dale King, Realty News Report) – Would-be home buyers who hoped Santa Claus might descend the chimney with a bag filled with good news this holiday season should put their sugar plum dreams on hold for another year. A more Grinch-like forecast is in the works for 2023 – or most of it.
After enduring 2022’s skyrocketing mortgage rates and household budgets pummeled by inflation, folks who yearned for more affordability in 2023’s housing market will find that home prices just aren’t coming down, says the Realtor.com 2023 Housing Forecast released today.
Instead, the residential market will likely begin a gradual adjustment that could last through 2025. What next year will offer buyers, the Housing Forecast says, is less competition for a growing number of for-sale homes.
A list of the 100 largest U.S. markets compiled by Realtor.com predicts that the pace of home sales will drop in many markets. But only one single region – that being Cape Coral-Fort Myers, Fla. – carries a forecasted drop in home prices. And that decrease is barely a drop in the valuation bucket at 1.9 percent.
Nation’s Home Prices to Increase 5.4 Percent in 2023
The national outlook says people who venture into the housing market in 2023 will face average home price increases of 5.4 percent. But those who can afford to persevere will find more inventory than last year with the number of available for-sale houses increasing a hefty 22.4 percent.
For the five Texas metros in the housing mix, figures are generally unremarkable. None approach the scathing losses anticipated along the West Coast. Realtor.com expects home sales in the Los Angeles-Long Beach-Anaheim area to drop 15.8 percent. Oxnard-Thousand Oaks-Ventura will fall 29.1 percent and potential buyers will turn their back on San Diego-Carlsbad to the tune of a 27.3 percent plunge in housing purchases. Prices will rise a bit in all those areas, the report says.
The Texas Forecast
In Texas, El Paso is likely to see the most upward action among Lone Star markets where home sales should rise 8.9 percent while prices increase 5.4 percent. Real estate agents in the Dallas-Fort Worth-Arlington metro will sell 3.1 percent more houses with price tags up 2.2 percent.Houston-The Woodlands-Sugar Land will pretty much follow suit, with home purchases up 2.9 percent as prices rise 4.5 percent. Same for San Antonio-New Braunfels with a 2.5 percent jump in home sales paralleling a 4.6 percent increase in prices.
The McAllen-Edinburg-Mission region will lose .5 percent of its sales while prices make a slight rise of 4.8 percent. Austin-Round Rock, a market once afire with price increases and soaring sales figures, will drop 6.6 percent in the sales arena, says the Realtor.com report. Prices will only go up 3 percent.
Overall, in 2023, Realtor.com predicts that buyers and sellers can expect:
- Average mortgage rates of 7.4 percent in early 2023, backing off to 7.1 percent by year’s end.
- Home sales prices won’t come down, but growth will moderate to a single-digit yearly pace (+5.4 percent) for the first time since 2020.
- Rents (up 6.3 percent year-over-year) will outpace home prices and will likely hit new highs, further adding to budget pressures – especially for first-time buyers.
- An increase in existing homes for sale (+22.8 percent year-over-year as the inventory refresh that began last summer)
- Home sales will decline 14.1 percent year-over-year to 4.53 million, the lowest level since 2012.
No silver lining in sight
“A trifecta of budget barriers awaits buyers. In 2023, incomes are expected to grow (+3.9 percent), but not enough to offset higher mortgage rates (7.4 percent) and home prices (+5.4 percent). The typical monthly mortgage payment will be $2,430 — 28 percent higher than in 2022, which will likely price many home shoppers out of the market. This will especially be a concern for first-time buyers.”
Also, “as rents will likely reach new highs, it will leave less room for saving towards a down payment. At the same time, some home shoppers may consider exploring new financial options like adjustable-rate mortgages (ARMs), a trend that already began to take shape in 2022.”
Still, a kinder, gentler market is in the wind. “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. It will be a challenging year for both buyers and sellers, but an important one in setting the stage for home sales to return to a sustainable pace over the next two to three years,” said Danielle Hale, chief economist for Realtor.com.
Second Wind in the Second Half of 2023
“Although home sales are expected to slow overall in 2023, Realtor.com’s forecast points to the possibility of a second wind in buying activity in the second half of the year. With mortgage rate hikes projected to continue through March, the spring season will likely be less busy than in a typical year as buyers and sellers recalibrate their expectations around smaller budgets. This break could provide space for demand to renew as mortgage rates dip later in the year, when home shoppers will also have more options and bargaining power.
Also, “it isn’t ‘08,’” notes the report. “During the mid-2000s housing boom, home sales were elevated for more than five years, and it took another five years for home sales to recover from the economic aftermath. Comparatively, mortgage rate hikes have brought a quicker but less dramatic end to the recent frenzy, during which buyers have been better qualified than in ‘08. Moving forward, home price growth will slow and may even decline periodically as prices largely stabilize over the next two-to-three years.”
“Some homeowners could still make bank. In 2023, the typical homeowner is projected to gain $25,650 in equity as prices keep rising. With real estate wealth already much higher than pre-COVID, these trends offer a positive reality check for sellers who have been increasingly pessimistic about entering the market as listing prices have pulled back from last year’s peak.”
“While bidding wars won’t be the norm in 2023, sellers who have owned their home for a longer period are still likely to make a profit. And those living in relatively affordable areas may still command offers above asking, driven by continued home shopper interest in relocating to lower-priced markets.”
Nov. 30, 2022 Realty News Report Copyright 2022
Photo: CALpix
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File: Home Prices to Rise in 2023