The US housing market’s deep freeze is prone to speed up next yr and end in the primary year-over-year decrease in home prices in a decade, in response to experts at real estate firm Redfin.
The median US home sale price is projected to fall 4% to $368,000 in 2023, in response to Redfin’s forecast for the upcoming yr. The decline will make the primary annual drop in home prices since 2012.
The costs declines will begin throughout the first quarter as owners closed deals on homes that went into contract at the tip of this yr, deputy chief economist Taylor Marr said in a blog post. Home prices have already begun to fall on a month-over-month basis in lots of markets.
“Prices would fall more if not for a scarcity of homes on the market,” Marr said. “We expect latest listings to proceed declining through most of next yr, keeping total inventory near historic lows and stopping prices from plummeting.”
Home prices are expected to fall most precipitously in so-called “pandemic boomtowns” that attracted buyers in 2020 and 2021. Cities most in danger include Austin, Texas; Boise, Idaho; and Phoenix, Arizona.
Meanwhile, home markets within the Midwest and Northeast are seen as likely to take care of their prices within the yr ahead.
Surging mortgage rates this yr have caused an affordability crisis, adding to the financial pain for prospective buyers that already faced steep home prices and crushing inflation.
The worsening conditions began to crush buyer demand within the second half of this yr and led desperate sellers to slash their asking prices – or pull their listings entirely.
A decline in sales volume is anticipated to proceed into next yr. The variety of existing home sales is anticipated to plunge 16% to 4.3 million in 2023 in comparison with this yr.
Marr said the sales slump is attributable “to affordability challenges including high mortgage rates, still-high home prices, persistent inflation and a possible recession.”
“People will only move in the event that they have to,” Marr added.
Home prices are expected to fall most precipitously in so-called “pandemic boomtowns” that attracted buyers in 2020 and 2021. Cities most in danger include Austin, Texas; Boise, Idaho; and Phoenix, Arizona.Bloomberg via Getty Images
Because the yr progresses, homeowners could see some relief in the shape of cooling mortgage rates. Redfin predicted 30-year fixed mortgage rates will sink to a mean of 5.8% by the tip of next yr – after they surged above 7% this yr.
“Mortgage rates dipping from around 6.5% to five.8% would save a homebuyer purchasing a $400,000 home about $150 on their monthly mortgage payment,” Marr said.
Federal Reserve Chair Jerome Powell has referred to current conditions within the housing market as a “bubble” – and the situation has prompted mounting anxiety amongst Americans.
A recent survey from LendingTree found that 41% of Americans expected a housing market crash inside the subsequent 12 months.