Real Estate Trends: What To Know About Today’s Housing Market in 2023

The housing market is constantly evolving. As a homebuyer or seller, it’s important to understand the latest real estate trends and factors impacting the current housing market. This comprehensive guide will overview everything you need to know about today’s real estate landscape in 2023.

Introduction

The housing market saw dramatic swings over the past few years due to the COVID-19 pandemic and other economic factors. After years of soaring home prices and bidding wars, the market is showing signs of cooling down in 2023. However, conditions can vary greatly by location.

This guide will provide an in-depth look at the major factors impacting real estate right now. We’ll explore national trends and statistics on home prices, sales, mortgage rates and more. You’ll also find an overview of housing inventory, affordability issues, investor activity and predictions for 2023.

Understanding these key real estate trends will help you make informed decisions whether you’re buying, selling or investing in residential properties this year.

After almost 10 straight years of home price gains, the rapid appreciation that marked the pandemic housing boom appears to be moderating across much of the country. Here’s an overview of the current state of home values nationally:

  • Home Price Growth Slowing: The average home price nationwide is up around 8% over the past year compared to 19% annual gains in 2021, according to Zillow. Price appreciation has slowed month-over-month since hitting a peak in February 2022.
  • Regional Variations: Some markets like Miami, Phoenix and Charlotte are still seeing double-digit price hikes. However, expensive coastal cities are cooling fastest. San Francisco prices are down 4.3% year-over-year.
  • Median Price Near $300,000: The national median home price sits around $297,000 as of October 2022, according to the National Association of Realtors (NAR).

Expect home price appreciation to continue slowing in 2023 as the market rebalances. But a full-on housing crash is unlikely due to limited for-sale inventory.

Home Price Forecast 2023

What’s in store for home values in 2023? Here are the latest predictions:

  • Freddie Mac: 3.2% home price growth
  • Fannie Mae: 0.0% to 2.0% growth
  • NAR: 1.2% appreciation
  • Zillow: -4.5% to +1.2% change
  • Goldman Sachs: -6% to -3% decline

Overall, most experts expect small single-digit changes nationally. Prices are likely to fall in some overheated areas but continue climbing in affordable secondary markets.

The housing market saw a remarkable rebound in sales following a slump early in the pandemic. But rising mortgage rates have cooled demand in 2022. Here are the key stats on U.S. home sales:

  • Sales Down: Existing home sales dropped 28.4% year-over-year in October 2022, according to NAR. New home sales fell 12.1% over the same period.
  • Sharpest Drop Since 2008: June 2022 marked the largest year-over-year decline in existing home sales since 2008. Sales slowed this summer as affordability worsened.
  • Regional Differences: The West saw sales plummet 45% in June 2022. The South declined 26% while Northeast & Midwest fell 15%. The West remains the weakest market.
  • Downward Trend: Monthly home sales have decreased year-over-year for 10 straight months after peaking in January 2022.

Ongoing mortgage rate hikes will likely cause sales to slip further through the end of 2022 into 2023. Expect weaker sales among first-time buyers and investors.

National Housing Inventory

One of the biggest factors weighing on the housing market is the national inventory shortage. Here’s an overview:

  • Record Low Inventory: There were just 1.22 million homes for sale nationally in October 2022 according to NAR. That equals 3.3 months supply at the current sales pace.
  • 38.1% Decrease: Active listings fell 38.1% year-over-year in October 2022. Inventory has dropped for 5 consecutive months.
  • Back to 2019 Levels: Housing supply is equivalent to October 2019 (pre-pandemic) levels after plunging to an all-time low in January 2022.
  • Regional Differences: Some markets have seen inventories rebound slightly. The West now has a 3.1-month supply while the South sits at 2.9 months.
  • Building Permits Down: Issued permits for new construction fell 8.8% year-over-year indicating limited relief ahead for inventory shortages.

Slim buyer competition and slowing price gains could encourage more homeowners to list. But overall supply will remain tight nationally through 2023.

Mortgage Rates Outlook

One of the most impactful real estate trends is the dramatic rise in mortgage rates over the past year:

  • Around 7% Now: The average 30-year fixed mortgage rate is hovering around 7% as of October 2022, per Freddie Mac. This is more than double the 2.7% average in January 2022.
  • Highest Since 2002: Current rates are the highest they’ve been in 20 years. The rapid rise happened as the Federal Reserve hiked its benchmark rate to tame high inflation.
  • Monthly Hikes: Rates saw nearly a full percentage point increase monthly from April through June 2022 with smaller hikes continuing through October.
  • Peak Around 7.5%: Most experts forecast rates will top out around 7.5% by early 2023 before falling slightly by year-end.
  • Monthly Payments Up: At today’s rates, a homebuyer borrowing $400,000 pays roughly $2,800 per month ($1,700 more than at 3%).

Higher rates are pricing many hopeful buyers out of the market. But those who can still afford to buy may benefit from less competition.

Housing Affordability Challenges

Skyrocketing mortgage rates coupled with still-high home prices have created major affordability issues for 2023 homebuyers:

  • Unaffordability at 2007 Levels: An average mortgage payment now eats up 36% of the median family income according to Oxford Economics. That matches unaffordability just before the housing crash in 2007.
  • First-Time Buyers Priced Out: The monthly payment on a median starter home is 57% higher than a year ago per Redfin. First-timers need household incomes 21% higher to afford today’s prices & rates.
  • Rising Rents: With homebuying out of reach for many, demand for rentals has surged. U.S. median rent hit $2,033 in August 2022, up 14% from 2021.vacancy rates below 5% make renters less likely to save up for a home.
  • Tougher Lending Standards: To qualify with higher rates, buyers need stronger credit scores and larger down payments. Average FICO scores on purchase loans rose to 729 in October.

If rates and prices remain high, expect lower home sales, more renters, and delayed household formation that could impact the broader economy.

Investor Activity Update

Real estate investors helped drive the pandemic housing boom. Here’s how this influential segment is impacting today’s market:

  • Investor Share Shrinking: Investors accounted for 15% of U.S. home purchases in 2022’s second quarter, down from a peak of 19% in 2013, per Redfin. Their market share has dropped as prices rise.
  • Retreating in Hot Markets: Investors made up over 25% of buyers in pandemic boomtowns like Atlanta, Phoenix, and Charlotte in 2021. Their share is down significantly in these areas.
  • Targeting Affordability: With lower returns, investors are focused on secondary markets and smaller homes. Markets like Birmingham, Cleveland and Rochester are investor targets.
  • Shifting Strategy: Some investors who bought homes to flip or rent out are now holding properties longer-term expecting values to rebuild.
  • Cashing Out: Institutional owners like Invitation Homes sold record numbers of rental homes in 2022 to take profits. More will likely offload properties if prices fall further.

Increased financing costs and slowing price growth are pushing smaller investors out of the market for now. Larger institutions may pivot strategies and reduce their housing portfolios.

Predictions for the 2023 Housing Market

Given the variety of factors impacting real estate right now, what can buyers and sellers expect in 2023? Here are the top expert predictions:

  • Slowing But Positive Appreciation: Home prices will likely rise 1-3% nationally versus 5-7% in a normal market. Markets that boomed in the pandemic may see declines while more affordable areas continue appreciating.
  • Mortgage Rates Above 6%: Economists expect rates will remain above 6% for most of 2023 as the Fed keeps rates high to combat inflation. This will continue to reduce buyers’ purchasing power.
  • Home Sales Down: Existing home sales are forecast to drop around 11% in 2023 according to Fannie Mae. Higher borrowing costs will continue to dampen demand. Total sales will be on par with 2019 levels.
  • Inventory Increases Slightly: New construction and more sellers listing should help nudge inventory up around 5-10% in 2023. But overall supply will remain tight compared to historical averages.
  • Affordability Issues Persist: Redfin predicts over 60% of homes will be unaffordable to average local workers across the country next year. First-time buyers will continue to face challenges saving for down payments and qualifying for mortgages.

While the housing frenzy appears to be over, conditions may begin stabilizing in 2023 with moderating but still elevated prices and steady sales just below recent peaks. Be sure to connect with local real estate professionals to understand dynamics in your specific area.

Buying a House in Today’s Market – What to Know

If you’re considering buying a home in the next year, here are some key factors to consider given the current real estate climate:

Mortgage Rates & Payments

  • Expect rates over 6% through 2023
  • Monthly payments will be substantially higher than 2020/2021 lows
  • Get pre-approved at today’s rates to understand your budget
  • Look for homes 25-30% below your absolute max budget to allow room if rates rise further

Home Prices

  • List prices remain up 15% or more from 2019 in many areas
  • But price drops are more common in overheated markets as demand softens
  • High rates offset some pricing gains; focus on monthly payment you can afford
  • Negotiate carefully – today’s market gives buyers more leverage

Inventory

  • More choices but still limited supply; 1.22 million active listings nationally
  • Expand your geographic search if needed for more options
  • Be ready to act quickly on the right home; bidding wars still occur
  • Consider new construction homes coming online as an alternative

Lean on an Agent

  • Housing market is rapidly shifting; work with an experienced local real estate agent
  • Agent can advise if prices seem inflated & help craft a competitive offer
  • Ensure you get expert guidance on local market conditions, pricing, negotiations & timelines

Even in a cooling housing market, buyers need to be strategic, patient, and ready to act decisively when they find the right home at a fair price.

Selling a Home This Year – Key Tips

For homeowners thinking of selling in 2023, here are some top tips to ensure you get top dollar:

Price it Right

  • Overpricing leads to stale listings; underpricing sparks bidding wars
  • Work with an agent to price accurately based on recent comparable sales
  • Factor in rising mortgage rates which offset nominal price gains
  • Be prepared to reduce price if you don’t get showings; lower prices typically generate interest

Get Your House Show Ready

  • Make all needed repairs & updates to maximize buyer appeal
  • Declutter inside and out; clean & organize every room
  • Consider staging your home to showcase its best features
  • Focus on renovations that provide the highest ROI like kitchen & bathroom upgrades

Time it Strategically

  • Aim to list before/after the peak home shopping seasons of spring & fall
  • Avoid listing during the slower holiday periods
  • List at the start of the week for maximum online visibility
  • Start showings quickly once listed to capitalize on buyer buzz

Market Aggressively

  • Work with an agent who will promote your listing across multiple platforms
  • Boost your listing through paid ads and social media
  • Leverage agent’s network to get the word out locally to potential buyers

Be Flexible

  • Recognize the market is shifting; you may need to adjust your expectations
  • Offer flexible closing dates, leasebacks etc. to appeal to buyers
  • Consider offers under asking price but focus on the final net proceeds

Getting your home in top shape, setting the right price, and effectively showcasing it to buyers will help you maximize your final sale price.

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Real Estate Market Forecast by City

Housing markets vary significantly across the country. Here is a snapshot of projections for 2023 home prices and sales activity in key U.S. cities based on leading analyst forecasts:

Phoenix

  • 2023 Home Price Forecast: -5% to 0%
  • 2023 Home Sales Forecast: -15% to -10%
  • Trend: After major boom, price drops expected in Phoenix next year as demand softens and investors retreat. Still positive long-term outlook.

Dallas

  • 2023 Home Price Forecast: +5%
  • 2023 Home Sales Forecast: -5%
  • Trend: Dallas remains relatively affordable. Price growth should continue outpacing other Texas cities, while sales moderate.

Atlanta

  • 2023 Home Price Forecast: +3%
  • 2023 Home Sales Forecast: -10%
  • Trend: Atlanta’s investor-fueled housing boom has cooled off significantly. Expect slight price gains and weaker sales.

Washington, DC

  • 2023 Home Price Forecast: -5% to 0%
  • 2023 Home Sales Forecast: -15%
  • Trend: DC is among the most overvalued markets, per Fitch. Price declines are likely next year as the region’s housing boom stalls.

Tampa

  • 2023 Home Price Forecast: -5% to +1%
  • 2023 Home Sales Forecast: -10 to -15%
  • Trend: Tampa prices may flatline or dip slightly as insurance costs rise. But still positive long-term outlook with ongoing in-migration.

Los Angeles

  • 2023 Home Price Forecast: -5% to -1%
  • 2023 Home Sales Forecast: -10%
  • Trend: SoCal market is cooling quickly as prices become unaffordable. Expect slight price declines next year and weaker luxury market.

New York City

  • 2023 Home Price Forecast: -5% to +1%
  • 2023 Home Sales Forecast: -5 to -10%
  • Trend: NYC market is softening, especially for high-end properties. Prices stabilizing as inventory rises but strong rental demand provides support.

FAQ

Still have questions about where home prices and sales are headed in today’s real estate market? Check out answers to some frequently asked questions:

Are home prices going to crash?

While prices are declining in some cities, experts don’t foresee a 2008-level national housing crash. Price drops so far are generally moderate. Ongoing supply/demand imbalance and strong employment should prevent a major downward spiral.

Will mortgage rates go back down in 2023?

Rates may dip slightly toward the end of 2023 but most economists expect rates to hold above 6% next year. The Fed is committed to keeping rates high to fight inflation. Buyers shouldn’t bank on a return to sub-3% rates anytime soon.

Should I wait to buy a home?

Buying a home is always a personal decision based on your situation. If you need to purchase soon for a life event like a new job, expanding family, or retirement relocation, it likely makes sense to proceed despite higher rates and prices. Trying to time the housing market is difficult. But if you have flexibility, waiting a few months could potentially provide more options and bargaining power.

Is now a good time to sell my house?

There is still strong demand from buyers in many markets across price points, which bodes well for sellers. Listing sooner allows you to take advantage of limited competition. With mortgage rates so high, pricing right and effectively marketing your home is critical. An experienced agent can provide guidance on ideal timing and strategy based on your local market.

Will home prices come down in 2023?

Nationally, prices are expected to rise slightly or remain flat in 2023. But markets like Phoenix, Las Vegas and many Florida cities that saw huge gains could see small price dips. Well-priced homes in desirable areas should still see bidding wars. Broad declines are unlikely without a severe economic downturn.

How long will the housing slowdown last?

Economists expect housing demand to remain dampened into early 2024 if rates stay high and the economy weakens. But markets could begin recovering late next year if inflation eases and rates start to come down. The housing shortage won’t be resolved quickly, which bodes well for long-term price stability once the market recalibrates.

Key Takeaways – 2023 Housing Market

  • Expect moderating home price appreciation nationally in 2023, with potential price declines concentrated in overheated pandemic boom cities.
  • Mortgage rates over 6% will continue to weaken buyer demand, leading to year-over-year declines in national home sales.
  • Inventory shortages persist but should improve slightly in 2023 as new construction ramps up and sellers list homes.
  • Housing affordability issues will remain a challenge, especially for first-time homebuyers facing high prices and rates.
  • Investors are pulling back, targeting smaller homes in more affordable secondary markets rather than pricey
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