What to Expect in the Housing Market in 2023

It’s been a whirlwind in real estate over the past few years.

Should we expect a slowdown in 2023? Danielle Hale, chief economist at Realtor.com is predicting a more balanced market. Hale predicts that the mortgage rate for 2023 will average 7.4%, the highest in a decade, which will continue to be a deterrent to buyers. Mortgage payments are expected to be up 28%, reaching an average of $2,430 monthly. Although home price growth has slowed since the craze of the pandemic market, the median home price appreciation is expected to go up 5.4% year over year, down from 10.2% year over year this year and down from 17% in 2021. Inventory is forecasted to not be as big of a hurdle for buyers, as Hale predicts the market will see existing-home inventory increase 22.8% year over year, compared to the 4% increase that happened in 2022 and the 19.4% decrease in 2021. The homeownership rate is expected to stay stable at 65.7%, compared to 65.8% in 2022 and 65.5% in 2021.

Home sales are expected to drop 14.1% year over year. Home starts are also supposed to fall 5.4% year over year.

Rent price growth is expected to outpace housing price growth. Vacancy in rental properties is only about 6%, which is close to record lows. With more demand and less properties, rent prices are anticipated to rise 6.4% year over year. While rental vacancies in metro areas were high during the pandemic, demand is expected to be higher as renters continue to be priced out of homebuying. Hale predicted that first-time buyers will continue to make up a smaller percentage of all buyers. In 2022, only 26% of buyers were first-time, the smallest percentage ever.