NAR Chief Economist Offers Insights Into 2023 Market During PAR Webinar

Dr. Lawrence Yun, the National Association of Realtors® chief economist, joined PAR President Al Perry on Thursday for a housing market forecast webinar.

Before starting on 2023’s forecast, Yun reflected back to 2020 to determine how 2023 will play out. Yun said the start of the COVID-19 pandemic led real estate into an “uncertain environment.” As Pennsylvania had the longest shutdown of real estate in the country, “once the lockdown ended, what a surprise, a boom in real estate. Consumers were wowed by 3% mortgage rates,” said Yun. “COVID contributed to the real estate boom. People wanted bigger houses or wanted to move to the suburbs.”

Specifically, Yun mentioned how Lancaster became one of the “COVID boom towns,” thanks to its affordability and resources. Many consumers wanted to get out of cities and Lancaster was one place many people relocated to.

“The real estate boom continued in 2021,” said Yun. “Things changed in 2022, driven by rising rates from 3% to 7%. This housing cycle we are currently experiencing is very unique. Buyers and sellers are retreating. One would think with buyers retreating, there would be massive amount of homes on the market, with sellers lowering prices, but that is not what we are seeing.” However, prices have really not come down, and the median price is still up, he added. They are not rising as quickly as they once were though.

Yun predicts interest rates will drop to 6% by the end of the year, opening the gates for more buyers to enter the market. Additionally, he predicted that prices of homes will remain stable, with most areas not seeing more than 2% to 3% gains or losses. “We will see fewer multiple offers, but also sellers will not have to drop their prices by much,” he said.

But don’t expect a repeat of the 2008 housing crash, said Yun, blaming that on “shady mortgages.”

“Today, you can only get a mortgage if you can demonstrate the ability to pay. We don’t have the risky subprime mortgage anymore. We don’t face the implosion of mortgages. The only way people should face foreclosure is unexpected job loss,” he said.

In addition to better mortgage practices, Yun cited job creation and lack of overbuilding as two more factors preventing a housing market crash. Job creation has seen net gains, and home builders have been underbuilding since before the pandemic, he said.

“Today, 1% of all transactions are a short sale. Back in 2008, it was one-third, either short sales or foreclosures. It’s at historic lows today. As long as prices don’t plunge, it will be normal home sales,” said Yun.

While first-time buyers are at an all-time low, representing just 26% of buyers, Yun said affordability remains the biggest issue, with mortgage rates having a big impact. However, he said home prices are no longer growing faster than wages and the mortgage rates are going down.

For homebuyers waiting for lower mortgage rates, Yun reminded the audience that one can always refinance mortgage rates when they go down.