Housing Market 2023: Predictions Focus on a Slowdown Despite Record Selling
Contractors, real estate agents, and homeowners have been hyper focused regarding what the selling market will look like within the last few months of 2022 and into 2023. Will mortgage rates be favorable for people looking to purchase a home? How much housing inventory is available to meet rising demand? What will average home prices be as we start to ease away from pandemic fears?
Before going over the future predictions, let’s take a look at where the housing market is at today. According to the National Association of Realtors (NAR) the month of July 2022 saw sales of 4.81 million units (at a seasonally adjusted rate). Median home prices averaged about $403.800 while new home sales in June were at 590,000.
The market did see a slight decline in existing home sales month-to-month than what sales were like a year ago during the same period. July sales for existing homes were at 20.2% from a year ago and down to 5.65% from July 2022. Pending sales were also slightly down by -1.0%. Home mortgage applications also saw a steep decline during July at 18.5% during July 2022 from a year ago for the same month, according to Fortune.
The slowdown of the market during the summer months isn’t anything new. Normally, the third quarter of the year (Q3) would experience a slight drop due to homeowners going on vacation, having the kids home from school, and people focusing on doing more renovations and remodeling projects to their existing homes.
When the pandemic was in full force in 2020, the housing market experienced a significant impact. While experts predicted the usual slowdown that was exacerbated by worldwide lockdowns, instead, homeowners took advantage of low mortgage rates to purchase existing homes and build new residences. Home prices skyrocketed due to this demand, which was further exacerbated by lumber shortages. Home prices skyrocketed by 20% in early 2020.
Also, the housing industry experienced an enormous gain in 2021 for single-family home and rental rates. Roughly 6.9 million in sales occurred in 2021 as there were historically low foreclosure rates and an increase in prices to 33% in 2021, states the Houston Association of Realtors (HAR).
Mixed Predictions for 2023
Throughout 2020 and up into early 2022, experts predicted a housing market crash that would be similar to what occurred during the Great Depression. However, due to the unexpected demand that occurred inform 2020 up into early 2022, the market appears more stable.
Now experts are looking at the summer decline in housing sales to predict that the slowdown will continue for the remainder of 2022 and into early 2023. This slowdown means that home prices will only experience a slight increase.
This increase could average around 2.4% in the next 12 months, which is still lower than the price increases felt back in July 2022. Experts are also keeping a close watch on what the Fed will do regarding inflation and mortgage rates.
According to Yahoo News, the Feds went into a bond buying spree in 2022, which caused the financial markets to push mortgage rates from 3.1% up to a higher 5.7% for 30-year mortgages. This factor may lead to a housing correction where stringent lending requirements may slightly cool off rising home buying demands.