If you’re thinking about buying or selling a house right now, you’re not alone. The housing market has seen a lot of unusual trends in the past couple of years, so it makes sense that you’d want the latest update on what’ll happen in the market before you decide to buy or sell. The truth is, housing market predictions are about as reliable as weather forecasts. The nation’s economists make their best forecasts based on data, but no one can know what’s going to happen with 100% accuracy.
Still, even if you don’t know for sure, you can check out what the experts are saying and make some pretty good guesses. Just remember, a housing market forecast can only give you an idea of what to expect if you buy or sell a house in the coming months. You never want to let a market prediction control your housing decisions . . . only your personal situation and finances should do that!
Housing Market Prices and Sales
Okay, first things first: 2023 is not 2021. The crazy way houses were getting multiple offers and selling for thousands of dollars over the asking price within hours of going on the market is pretty much over. But the U.S. real estate market is still strong. It’s just not crazy anymore. And really, crazy just adds an extra level of stress to buying or selling a house so I for one, and very glad to see that’s in the rearview mirror!
Housing Market Recession: What Is It and Are We in One?
A housing market recession means the total number of home sales has been shrinking for at least six months in a row. So are we in some kind of housing recession? Well, sort of, but a housing recession isn’t something to really worry about since home prices aren’t in a recession. It’s true that December 2022 marked eleven straight months of decreases for the total number of home sales, but keep in mind, these are national figures for the entire U.S. Home prices are continuing to increase compared to the previous year because we still have a shortage of available homes to sell here in Kansas City.
And since 2021 and 2022 were both record years for the total number of home sales, what we’re really seeing now is home sales volume returning to normal, pre-pandemic levels. In other words, this is more of a housing market correction than a recession. Fannie Mae expects the number of home sales to drop slightly in 2023 but predicts home sales to rebound by 12.8% in 2024.
The market would only be something to worry about if the declining home sales were an indicator of too much supply (houses for sale) and not enough buyer demand—which could cause home values to drop and hurt the overall economy. But that’s not the case here. The economy is still pretty strong and as long as unemployment figures are well below 8%, people will continue to be optimistic and keep buying real estate. However, home prices are forecasted to continue rising at a slower rate this year. We’re in a little bit of a flux right now as the economy and market continue to balance out but trust me, home prices will continue to rise over the next five years!
The shortage of supply has been one of the main drivers of home price growth and that will continue in 2023, but rising interest rates are discouraging potential sellers and new construction. This means that there is little hope for improvement in the housing supply and a sustainable housing market that would result from an increase in inventory. The significant increase in mortgage rates since last year has made the already expensive housing market even less affordable. Home prices experienced a meteoric rise during the pandemic due to factors such as high demand, low supply, and record-low mortgage rates. However, the sudden increase in mortgage rates has dampened the market’s growth and affordability, making it difficult for first-time home buyers to enter the market and they typically make up 30% of the overall real estate market.
Will It Be Cheaper to Buy a House in 2023?
Experts at the National Association of REALTORS® (NAR) actually predict home prices to continue going up compared to 2022. Meanwhile, the National Association of Home Builders (NAHB) expects home price growth to drop slightly. That’s why it could be a great time to build, but with the increased cost of labor and materials, don’t expect a huge drop in prices. We simply won’t see builders rising prices by 10-15% as we’ve seen recently.
But again, there are no signs of rapid decreases anywhere in the greater Kansas City area. And minor price fluctuations shouldn’t really influence your plans one way or another.
If you have questions specific to your situation, I would suggest you call me. I’d love to help you understand whether buying a new home in 2023 makes sense for you.