Home Real Estate Don’t expect a drop in home prices in 2023, NAR economist says

Don’t expect a drop in home prices in 2023, NAR economist says

by Ozva Admin

Although high mortgage rates, slow Home sales and high inflation have taken a significant toll on the housing industry, these issues are unlikely to drive home prices down next year, at least according to National Association of Realtors (NA) Chief Economist Lawrence Yun.

In fact, we can see a additional uptick in home prices in 2023, even if mortgage rates stay at or near 7%, Yun said.

Yun, who analyzed the current state of the residential market, offered his market outlook for 2023 on Friday at the NAR conference in Orlando.

“In most parts of the country, home prices are stable because available inventory is extremely low,” Yun said. “Some places are seeing price increases, while others, notably California, are seeing prices recede.”

Although the unprecedented uptick in mortgage rates caused a lack of demand from buyers, it has also acted as a deterrent to homeowners who are hesitant to put their homes up for sale in a tough market. Successively, buy inventory levels they have remained low in most markets.

Housing market conditions are also fundamentally different than they were during the Great Recession, according to Yun. As such, there is unlikely to be a significant increase in the inventory of distressed properties on the market, or a subsequent decline in home prices, in the near future.

“Housing inventory is about a quarter of what it was in 2008,” Yun said. “Distressed property sales are almost non-existent, at just 2%, and nowhere near the 30% mark seen during the housing bust. Short sales are almost impossible due to the significant price appreciation of the last two years.”

In addition, there are signs that mortgage rates have exceeded 7%, Yun noted. An example of this is the consumer price index for October, which showed that inflation is rising less than expected.

But while Yun expects to see a 1% increase in the national median house price next year, he noted that some markets will experience price increases, while others will experience price declines.

Yun also expects home sales to decline 7% in 2023. However, he expects 2024 to result in a strong rebound in home sales, with a projected 10% increase in home sales and a 5% increase in home sales. in the national median home price.

While the outlook for 2023 was generally positive, Yun expressed concern about the spread between mortgage rates and the fed funds rate.

“The gap between the 30-year fixed mortgage rate and the government borrowing rate is much higher today than it has been historically,” Yun said. “If we didn’t have this big gap, mortgage rates wouldn’t be 7%, they would be 5.8%. A normal differential would reactivate the economy. If inflation goes away, we would see less anxiety in the financial markets and lower interest rates, allowing homeowners to refinance.”

He also noted that this year’s housing market downturn has had a huge impact on the nation’s overall economic performance.

“The drop in sales and housing construction has [brought] reduce GDP,” Yun said. “If the housing market stabilized and didn’t decline, GDP would be positive.”

Some other forecasts expect home sales to fall in 2023, including Goldman Sachswhose economists suppose house prices will fall between 5% and 10% next year.

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