Home sales are slowing as interest rates rise, and prices are also cooling as buyers are put off by interest rates hovering around 7%, double what they were this time last year. But Realtor.com’s 2023 housing-market forecast is predicting that affordability will remain an issue in 2023.
It said the rise in home prices will moderate to a single-digit yearly pace (5.4%) for the first time since 2020. (Home prices rose 8.6% in the third quarter and 14.2% in the second quarter, according to the National Association of Realtors.)
The typical monthly mortgage payment will reach $2,430 in 2023, 28% higher than this year, which will likely force many would-be home buyers out of the property market and ultimately force them to keep renting, the report said.
“Compared to the wild ride of the past two years, 2023 will be a slower-paced housing market, which means drastic shifts like price declines may not happen as quickly as some have anticipated,” said Danielle Hale, chief economist at Realtor.com.
“‘Compared to the wild ride of the past two years, 2023 will be a slower-paced housing market, which means drastic shifts like price declines may not happen as quickly as some have anticipated.’”
— Danielle Hale, Realtor.com
“It will be a challenging year for both buyers and sellers, but an important one in setting the stage for home sales to return to a sustainable pace over the next two to three years,” she added. “Higher costs will lead to fewer closings.”
On Tuesday, the S&P CoreLogic Case-Shiller U.S. 20-city price index fell 1.2% in September, its third consecutive monthly decline. Year-on-year appreciation was 10.4%, down from 13.1% in August.
A separate report released last month suggested house prices would take a hit in 2023. Independent research firm Capital Economics warned that house prices will slump by up to 8% next year, and house sales will also decline.
“Given that we are unlikely to see an improvement in affordability anytime soon, many buyers will be priced out of the market, while others will simply be unwilling to make a purchase,” it said. “As bidders become scarcer, market power will shift further from sellers to buyers.”