NAR Predicts Housing Prices Will Be Stable Next Year

Lawrence Yun, NAR chief economist and senior vice president of research, forecasts that 4.78 million existing homes will be sold, prices will remain stable, and Atlanta will be the top real estate market to watch in 2023 and beyond.

“Half of the country may experience small price gains, while the other half may see slight price declines,” Yun said in prepared remarks. “However, markets in California may be the exception, with San Francisco, for example, likely to register price drops of 10% to 15%.”

Yun unveiled his forecast this week during NAR’s fourth annual year-end Real Estate Forecast Summit. Among other points, he predicted that home sales will decline by 6.8% compared to 2022 and the median home price will reach $385,800 – an increase of just 0.3% from this year.

He also forecast that the 30-year fixed mortgage rate will settle at 5.7% and rent prices will rise 5% next year.

Ray Costello, managing director, Property Inspect US, tells GlobeSt.com that if the Federal Reserve continues to raise interest rates as aggressively as they have over the past eight months, the NAR forecast of a 6.8% decline seems on point.

“Should interest rates stabilize or go down, we believe, based on a continued desire for home ownership, that sales will match or exceed 2022 levels.”

In both scenarios, buyers will become more diligent while making purchasing decisions, meaning pre-purchase home inspections and connected industries will go back to pre-pandemic levels.”

Home365’s Co-founder, Chad Gallagher, notes that these projections are 100% driven by a historic increase in interest rate — the first major interest rate hike in 40 years.

“I would be surprised if sales are only down 6% year over year,” Gallagher told GlobeSt.com. “Keep in mind most homeowners are sitting on interest rates of 3% to 4% on their house, so it’s a huge increase in the new mortgage when they have to pay 7% to 8%.

“If interest rates stay where they are, we would actually expect sales to be down more like 10% to 20%. The negative impact to the economy may be high enough in 2023 that the Fed actually pulls down the interest rate in the back half of the year. If it does, then we will see more like a flat to 5% down realty sales year over year.”

Young Adults Facing Toughest Home Buying Challenges

Even moderate changes to the housing market next year won’t erase the affordability crisis that has taken hold in most markets across the US. Larry Jacobson, president and CEO of Jacobson Equities, said that in today’s market, the combination of rising interest rates and low supply has made the cost of owning a single-family home increasingly difficult for many.

“Housing prices are too expensive for many Americans and not enough new homes are being added to the housing supply fast enough to create a substantial pricing reduction,” Jacobson said.

“This is especially true for younger Americans. In fact, according to NAR, by mid-2022, the share of homes purchased by first-time buyers declined from 34 to 26 percent, the lowest level in at least four decades and the median age of home buyers shot up from 45 to 53, the oldest since NAR started collecting data in 1981.

“As home sales decrease, we will instead see a rise in people opting to rent at multifamily communities for longer periods of time as it will not be feasible for them to switch to homeownership in the near future.”

The supply of homes is at a historic low in the US.

“This low supply is being exacerbated as a result of inflation and its effect on the rising costs of goods, labor wages, and materials.

“Low supply, high pricing, and sharp interest rate increases are prompting many Americans to delay home ownership. These factors are, in turn, influencing a growing demand for rental units in multifamily properties.”