Existing home sales are down 16% this year compared to 2021, when sales were abnormally high, according to NAR Chief Economist Dr. Lawrence Yun, who spoke during NAR’s Real Estate Forecast Summit last week.
“From the beginning of the year, we’ve seen a decline in sales,” Yun said. “I would not be surprised if we have two months of more decline.” He predicted sales may fall slightly in 2023, with home prices holding steady.
New home sales, which make up 15% of the market, are down 17% in 2022 compared to pre-COVID levels. Single-family housing starts are down in 2022.
“Median home sales prices have risen substantially to around $400,000,” Yun noted. “It’s hard to believe in 2000, the median home sales price was $150,000.”
“Given that prices are so high, it’s a valid question to ask if home prices will crash,” Yun said. He explained that conditions are different now compared to the market in 2008. He said in 2008, there were 8 million job losses in a single year, subprime lending and risky mortgages were occurring and about 4 million homes were on the market.
“Today we have about 1.5 million homes on the market and mortgage delinquency and foreclosures are at historic low levels,” he added.
Yun believes there are hopeful signs related to next year.
“Mortgage rates, which are the lifeblood of the housing industry, have been falling the last four weeks. There is an indication that they could decline even more,” he said.
Danielle Hale, chief economist for Realtor.com®, said, “We are forecasting price growth in 2023, which may be unfortunate for those trying to enter the market. On the whole, we expect prices to be higher because of the shortage conditions.”
“There are a decent number of buyers waiting for their chance, waiting on the sidelines,” she added. “We don’t expect a lot of growth in home construction. We expect more homeowners to put their homes on the market, but it will be taking longer to sell their properties. Buyers will be cautious to enter the market, but they will have more time to make a decision.”
Danushka Nanayakkara-Skillington, assistant vice president for forecasting and analysis for the National Association of Home Builders, said based on their survey of builders, they’re expecting a decline for single family home starts in 2023.
“Lumber costs are coming down, but the aggregate price is up 14% from last year and there are still supply shortages,” she noted.
She said material supply and construction workers are creating challenges in the market. “With the supply issues and lack of skilled labor and requirements continuing to increase, all of these issues are keeping the building starts down.”
Bright MLS Chief Economist Dr. Lisa Sturtevant said, “There’s a lot of resetting of expectations of both buyers and sellers in this market. Buyers are coming to terms with the new market and prices adjusting downward and seller concessions.”
She added that markets where prices ran up during the pandemic, “Zoom communities, where buyers bid up home prices, will see prices reset to reflect the local market conditions. Regardless, almost every market will see prices above those in 2019. Even if they do come down, they’ll still be above where they were before the pandemic.”
Corelogic Executive, Research and Insights and Deputy Chief Economist Dr. Selma Hepp said their research shows home price growth has decelerated in the past year, however the decline from September to October was the smallest they’ve seen. “This is a positive outlook for 2023,” she said, adding, “I do think home prices will vary across the country.”