Will House Prices Go Down in 2023? An Expert's Insight

The idea of a housing market crash has been looming for some time. Home sales have been declining, mortgage rates remain high, and home construction is still difficult. In July, the average price of homes dropped by 0.77%. This has led many to believe that a more s

Will House Prices Go Down in 2023? An Expert's Insight

The idea of a housing market crash has been looming for some time. Home sales have been declining, mortgage rates remain high, and home construction is still difficult. In July, the average price of homes dropped by 0.77% compared to the previous month, the first monthly drop in almost three years. This has led many to believe that a more significant correction is coming.

In February, the founder of Zelman & Associates described the peak of the housing boom caused by the pandemic. Just a few weeks later, rising mortgage rates boosted the US economy. This summer, as the housing correction intensified, Zelman made a downward assessment of the US housing market. Home prices for clients of his boutique housing research firm have decreased. But Zelman isn't the only real estate bear either.

From peak to bottom, Moody's Analytics expects US home prices to drop from 0% to 5% nationwide. If a recession occurs, Moody's forecast increases to 5% or 10%, respectively. Research firms such as John Burns Real Estate Consulting, Zonda, Capital Economics and Pantheon also forecast a decrease in home prices. Fitch Ratings believes that home prices could fall by 10 to 15% if the housing decline worsens. Mark Zandi, chief economist at Moody's, explains to Fortune that factors such as the record low of vacancies, the very good underwriting and simple loans will not be enough to avoid a single-digit drop in house prices.

However, it will prevent the US housing market from falling into a full-fledged housing crash. This time, Zandi says, homeowners are in a much better financial situation. It is important to keep in mind that when an economist or analyst talks about US home prices they do not refer to your house. Across the country, Zandi says, the results of the ongoing housing correction will vary. In booming markets such as Austin and Boise, Zandi predicts that home prices will fall between 5% and 10%.

If a recession occurs, Zandi expects falls of 15 to 20% in the country's 187 regional real estate markets which are significantly overvalued. Zillow is one of those who forecast a single-digit increase in home prices next year, although it also expects home value growth to continue to slow down. Baby boomers accounted for the highest proportion of home sellers at 42%, however, the proportion of sellers from the millennial generation increased from 22% to 26% over the past year. The increase in rents and mortgage rates has excluded many people from the housing market who have gone from an average of just 3.2% at the beginning of the year to 5.81% in mid-June. According to the most recent CoreLogic Case-Shiller S&P Index, the cost of buying a single-family home increased by more than 20% in April compared to the same month last year. And while Zillow anticipates a slowdown in domestic home price growth to 1.4%, it will vary significantly depending on regional markets. The FHFA HPI is the country's only collection of freely available public housing price indices that measure changes in the value of single-family homes based on data from 50 states and more than 400 US cities dating back to the mid-1970s. But now that a correction in housing markets seems increasingly likely to occur in the coming quarters what does this mean for wealth inequality and affordability? Economic forecasters despite the recent recession are still expecting strong demand from buyers (the millennials) and a high rise in home prices in the housing market. The CoreLogic Market Risk Indicator (MRI), a monthly update of the overall health of housing markets across the country predicts that Bremerton-Silverdale Washington is at a very high risk (more than 70% likely) that home prices will fall in the next 12 months.

However they are faced with a shortage of available housing and are now faced with higher rates close to 6%.The impact of consumer confidence on household spending is particularly important in the United Kingdom where consumption accounts for more than 60% of GDP. So what can we expect for house prices in 2023? It is difficult to make an accurate prediction as there are many factors at play that could affect house prices both positively and negatively. However, it is clear that there is an increasing likelihood that house prices will go down over this period due to rising mortgage rates and other economic factors.

Preston Morand
Preston Morand

Infuriatingly humble tv fan. Social media aficionado. Hardcore music ninja. Incurable pop culture fanatic. Award-winning zombie aficionado.

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