The low mortgage rates during the pandemic and low income of one section of people helped a lot of Americans buy homes at cheaper rates. But this sudden boom was only short-lived. Eventually, this market had to go down because the number of houses and land was not increasing with demand. The housing inventory is overwhelmed and is again driving up the average home prices.
According to Fortune’s news report and market analysis, this sudden boom in demand during the pandemic led to a severely low inventory. It was so low that the records hit a 40-year low. Statistically speaking, another major reason was that millennials became of home buying age during the pandemic. With remote work, this generation started saving a lot of funds, and many went to invest this in buying houses.
This sudden rise in demand also led to more investors coming into the housing market to start bidding wars. The prices of homes started growing sharply, and the rising inflation and Fed rising rates also led to a steep rise in mortgage rates. All of these factors together shook up the whole housing market in America for both 2023 and 2024. Experts believe that the pandemic boom has left a long-term impact and the ripple effects are here to stay.
Are you a real estate business manager or owner who wonders what the market will look like in 2023? As the year comes to an end, many expert opinions and market reports are coming our way. Read this article to learn every detail about the housing market predictions for 2023 and plan your strategy and leadership to benefit from these predictions.
What is the present housing market in 2022?
Before we dive deep into the housing market predictions for 2023, we need to know the present conditions of the market to throw light on the future. What does the present market in 2022 look like? According to CNN news reports, the home prices in the US reached a record high in June; the median price touched a whopping $416,000. But the same predictions also believe that now the prices will increase slowly, unlike in the beginning months of 2022.
The price has slowed down comparatively, even though the prices reached a record high. The increase in June 2022 was only by 13.4% for existing homes, whereas the increase was more than 23% in June 2021. The prices of newly constructed homes are actually going down a little and are stabilizing the housing market, which is acting as a good sign for real estate companies.
But existing homes only make up 10% of the total housing market in the USA; on the other hand, existing homes make up the rest 90%. Though the price rise is slowing down, it is still at a record high, putting pressure on existing inventory. Many first-time homebuyers are finding it difficult to buy homes.
Even the mortgage rates have gone up steeply. So the homes that were affordable for the millennials at one time are no longer within their range. This has led to a lot of people backing out on home deals at the last moment. CNBC reports found that the home cancelation rates at the last moment are at a peak and are now at their highest since the onset of the pandemic. Rising inflation and mortgage rates are being blamed for these. But will things change for the better in 2023? Let us find out.
Housing market predictions for 2023. Will prices drop?
Zillow’s housing predictions and market survey believe that the housing prices in 2023 will slow down significantly. According to market reports, the current rates are at a steady 16% rise in prices. But Zillow also predicts that home prices will not increase or decrease at the same rates in every region across America. There are vast differences based on region, and you need to become aware of which ones will impact you more.
Fortune reports on Zillow predictions say that the average home prices in the next twelve months are likely to rise only 2.4%. Whereas a few months back, due to an unstable market, they made a prediction that the prices would rise by more than 7.8% in 2023. As we come nearer to the year-end, the predictions are changing, and they seem to be changing for the better. If prices drop, sales are bound to increase and help real estate businesses stay afloat in the market.
But why did this change of prediction happen? Experts feel that this mostly happened because of the housing recession that is setting in due to low inventories and low economic transaction rates.
What will the overall American housing market look like?
According to Fortune news reports, they believe that millennials grew up at the worst time to buy their first houses. Millennials now account for 43% of the total home buying demographic, but many of them can not dream of affording their own homes. Inflation is rising, many people are losing their jobs due to the pandemic, and mortgage rates are skyrocketing. Combined with these factors, most millennials will find it very hard to own their own properties in the coming years.
Mortgages may still remain high
The mortgage rates jumped 2% in 2022, mostly because the Feds increased their borrowing interest rates. This made even affordable houses quite unaffordable throughout 2022. But CNBC reports believe that as 2023 proceeds, the rates will subside a little and become stagnant somewhere around an average of 4.5%. But what the future holds is yet to be seen. Though 4.5% is much lower than the current rates in 2022, it is still much higher than the general average. So how this impacts home sales remains a matter of debate.
Preparing ahead of time for the 2023 housing market
Have you prepared your strategy and leadership to go into the new year and grow and flourish your business in 2023? The housing market predictions are a mix of positives and some negatives. So you need to work around or with these predictions to plan your business strategy for the upcoming year. If you are a little overwhelmed with the process and the volatile market around you, we can help.
Get in touch with us to know more!