Experts Predict What The Housing Market Will Look Like In 2023

The housing market is sending clearer signals that historically low mortgage rates and the home-buying frenzy have come to an end. As we near the end of 2022, here’s a look at the expectations of real estate experts for 2023.

Danielle Hale, chief economist: After several years of an unambiguous sellers’ market, the 2023 housing market could feel more like a nobody’s market. We expect to see some buyer advantages in the form of 22.8{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} more homes for sale, however, the increase will result largely from homes taking longer to sell amid challenging affordability conditions. For-sale homes will remain high-priced, with the national annual median price for 2023 expected to advance another 5.4{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb}—less than half the pace observed in 2022. Still high prices mean that homeowners are likely to walk away from a home sale with significant equity, if they decide to venture into the market and can find a buyer. On the whole, however, we expect home sales to be dramatically lower, down 14.1{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} compared to 2022 as both buyers and sellers pull back from a housing market and economy in transition. We expect the annual tally for 2023 to be roughly in line with the recent pace of home sales in late 2022.

For many potential first-time home buyers, 2023 will herald a delayed dream rather than a celebration as home costs exceed what’s possible on their budget and income. As fewer households make the jump to homeownership, increased rental demand could help keep rents moving higher. Nationwide, the median rental is projected to increase 6.3{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} in price, even as an influx of new multifamily housing helps to better meet rental demand. Renters looking to save in the year ahead may consider moving further out to the suburbs.

A still strong jobs market will keep incomes growing at a faster than historically average pace (3.9{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb}), but they will not exceed expected inflation (4.1{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb}) which means that many households will continue to make tough budget tradeoffs. After years of high-flying tech cities dominating real estate who’s-who lists, this year’s top performers are expected to be modest, mid-sized domestic industry hubs in the Northeast, South, and Midwest. The slow and steady real estate markets in these areas where homes continue to be affordable will be the stars in 2023, better weathering the affordability challenges that loom ahead.

Bob Pinnegar, president and chief executive officer of the National Apartment Association: Pursuing sustainable and responsible solutions to address our nation’s housing affordability crisis will remain a steadfast priority in the new year. Our nation’s affordability challenges stem from an alarming supply/demand imbalance, and to properly address this we must build 4.3 million new apartments by 2035.

On the economic side, supply chain issues have begun to ease and will hopefully continue to in the year ahead. While jobs are steady, the labor market faces challenges in areas like construction, where workers are needed. Inflation is starting to show signs of easing, but any of those impacts are unlikely to be seen until the end of 2023.

State and local lawmakers continue to consider damaging policies like rent control, which more than 40 years of academic research and real-life case studies consistently reiterate is ineffective in addressing affordability. Rent control distorts the housing market by acting as a deterrent and disincentive for rental housing development and expedites the deterioration of existing housing stock. As these policies continue to be discussed, the rental housing industry will continue to advocate for responsible solutions – like revitalizing Section 8 and removing barriers to apartment development – that will improve affordability challenges long-term.

Nick Bailey, president and CEO of RE/MAX, LLC: One thing I can say for certain about the housing market in 2023 is that no matter the macro-economic conditions, Americans will continue to buy and sell millions of homes. Generally speaking, when we’re talking about the overall health of the housing market, most people are approaching that conversation from the lens of an investor. Will the market bottom out or have we hit the top? That’s an important conversation, but the truth is, people are getting married, divorced, moving to care for aging family members, relocating for career opportunities and so on, every single day. And for those people, it’s less about the interest rate or mortgage rates that week and more about their present situation and whether they can afford a house that fits their needs.

I’m optimistic that 2023’s spring selling season will be a bright spot as levels of inflation get more under control. There will still be extreme demand as new construction just can’t get out of the ground fast enough, and the Millennial home buyers, who make up a huge demographic, are primed to make their move. According to a recent survey conducted by RE/MAX in partnership with SWNS Media Group, 84{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} of Gen Z, 79{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} of Millennials and 61{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} of survey respondents 77 or older plan to buy a house or condo in the next few years. In my opinion, 2023 will be a better year for housing than many people think, especially because we’ll no longer have year-over-year comparisons to 2021 – an historic outlier that made 2022 seem less than what it really was.

Jacob Channel, senior economist for LendingTree: The housing market will remain tough for many would-be buyers. While mortgage rates might stabilize, prices could decline, and buyers may be able to negotiate with sellers more in 2023 than they were able to over the height of the pandemic, that doesn’t mean that buying a home is suddenly going to become a walk in the park. On the contrary, affordability challenges will likely persist for many, owing to rates remaining steep and supply remaining limited.

Borrowers shouldn’t expect rates to fall to anywhere near their record 2021 lows, or even to as low as they were at the start of 2022. Home prices won’t necessarily fall everywhere, but a combination of relatively high rates and weak home buyer demand will probably push prices down nationwide this year. Although a 5{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} to 10{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} drop may seem steep, it’s important to keep in mind that because home values rose so much over the height of the pandemic, declines this year are unlikely to totally wipe out the gains that many homeowners saw over the past few years.

Lawrence Yun, chief economist for the National Association of Realtors and senior vice president of research: 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. Home sales will decline by 6.8{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} compared to 2022 (5.13 million) and the median home price will reach $385,800 – an increase of just 0.3{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} from this year ($384,500).

Half of the country may experience small price gains, while the other half may see slight price declines. However, markets in California may be the exception, with San Francisco, for example, likely to register price drops of 10–15{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb}. Rent prices will rise 5{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} in 2023, following a 7{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} increase in 2022. Foreclosure rates will remain at historically low levels in 2023, comprising less than 1{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} of all mortgages. The gross domestic product will grow by 1.3{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb}, roughly half the typical historical pace of 2.5{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb}. After eclipsing 7{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} in late 2022, the 30-year fixed mortgage rate will settle at 5.7{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} as the Fed slows the pace of rate hikes to control inflation. That is lower than the pre-pandemic historical rate of 8{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb}.

Taylor Marr, Redfin deputy chief economist: Slowing inflation and the hope of the Fed easing rate hikes in the new year are likely to bring mortgage rates down further and thereby improve homebuying demand. But don’t call it a comeback or even a recovery yet; demand is still way down from its peak. We’re keeping a close eye on the labor market for confirmation that inflation will continue slowing. A strong job market like the one we have now contributes to inflation because it pushes up wages and leads to higher prices. Though it seems counterintuitive, a slight uptick in unemployment and/or slower economic growth would likely help bring mortgage rates down further. If that happens, the increase we’re seeing in early-stage demand could translate to an uptick in pending sales in early 2023.

Selma Hepp, interim lead of the Office of The Chief Economist at CoreLogic: Following the recent mortgage rate surge above 7{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb}, real estate activity and consumer sentiment regarding the housing market took a nosedive. Home price growth continued to approach single digits in October, and it will move in that direction for the rest of the year and into 2023. However, while some housing markets have seen significant recalibration since the spring price peak and are likely to post losses in 2023, further deteriorating for-sale inventory, some relief in mortgage rate increases and relatively positive economic news may help eventually stabilize home prices.

Jeff Tucker, Zillow senior economist: The rental market is cooling, but to this point it hasn’t brought any real relief for renters. However, there are signs affordability may improve in the coming months. Annual rent growth has fallen from a record 17.2{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} annual growth in February to 8.4{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} year-over-year growth in November.

Renters looking to sign a new lease in 2023 should feel encouraged about this data, but still need to keep a close eye on the market and act quickly when they find a rental that fits their needs and budget. Rents are still higher than they were pre-pandemic, so tradeoffs and flexibility will still be necessary into next year. Renters facing a renewal should know that they’ve got more bargaining power this year and should carefully consider the prices of other nearby rental options when negotiating a lease renewal.

Kuba Jewgieniew, CEO and founder of Realty ONE Group: Homeowners will stay in homes due to locked-in lower interest rates. Regarding Realtors, 300,000 to 400,000 new licensees entered the real estate market over the past couple of years (similar to the relative percentage growth of NAR members between 2005-07).

Many top-producing professionals and teams that have been closing $100 million per year in transaction sales, chose this career path during real estate’s hot markets (2012-2020). So, they haven’t experienced a severe downward cycle like this since 2008. There are more than 90,000 real estate brokerages in America. Of these, many will consolidate, and others will get wiped out. Their Plan B funding source for access to capital, just to stay afloat, are friends and family.

The average interest rate on a credit card is now at a high of over 18{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} and expected to be in the 20’s soon. Home equity lines of credit are increasingly popular during high inflationary times.

Lisa Sturtevant, chief economist for Bright MLS: Over the past year, the housing market underwent an about-face as rapidly rising mortgage rates dramatically slowed home sales activity. In 2023, the housing market is expected to continue its correction and the housing market will start to look more normal, though we may need to reconsider what normal means. Mortgage rates will decline slowly in 2023, though will remain above 6{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} for most of the year. While not high by historic standards, 6{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} mortgage rates along with fast-rising prices will also keep some prospective buyers out of the market. Bright MLS’ forecast suggests that there will only be 4.87 million home sales in 2023, down 6{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} compared to 2022, and the lowest level of sales activity in nine years.

The median home price is expected to be relatively flat in 2023, rising just 0.3{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} year-over-year. But the national figure does not tell the whole story. Local markets that are more affordable and where the local economy is strong will see stronger price growth in the year ahead. In contrast, higher-cost metros, where housing affordability is a challenge, are at greater risk of price drops. In addition, pandemic boom towns where demand surged will also see greater price corrections in 2023. The frenzied pace of home sales activity during the pandemic was not typical or sustainable, nor is it good for a healthy, stable housing market. A return to a slower market with more modest price growth is a good place to be headed in 2023.

L.D. Salmanson, CEO of Cherre, a data integration and insights platform: Looking at the current market, we are seeing fewer transactions and increasing days on market. Low absorption rates indicate a price gap between buyers and sellers. Historically, this environment had been temporary — people lost their jobs while still carrying mortgages at variable rates. This will likely force sellers to have a reality check in 2023, needing to lower prices to make the sale. As interest rates continue to rise, the housing market is less appealing to potential buyers and mortgage applications are extremely low. Though a few very specific markets have sustained demand, most markets will see large corrections, and some markets, like South Florida, will even experience 20-30{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} price drops.

Any time there is a hot housing market with a sharp increase in the median home price, there is the possibility of a housing bubble. After home prices hit their peak in June, we saw the first decline in home price growth in 10 years, with the lagging Case-Shiller Index showing price increases falling 1.3{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb}. Black Knight also reported that U.S. home equity dropped 7.6{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} in Q3, marking the largest drop since 2009. Though we are not technically currently in a housing bubble or experiencing a major market crash, declining prices coupled with interest rates climbing higher than 7.14{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} indicates that we are experiencing a market downturn that will continue into 2023.

Kate Wood, home expert at NerdWallet: After three years of a wildly unbalanced housing market, it’s tempting to hope 2023 will at last bring normalization. But the market remains far from normal, even if it’s no longer going to extremes. Rates have fallen from the peaks of October and November, but with continued upward pressure from the Federal Reserve the lows we’re seeing now could just be the eye of the hurricane. And major economic or geopolitical changes could, as they did this past year, totally upend rate forecasts. Home prices will likely continue dropping next year, but this won’t be a bubble bursting. These price drops will be more like a balloon slowly deflating — no longer headed skyward, but still hovering out of reach for many. Markets seeing the most significant drops will be those where home values grew the most rapidly, so even with prices dropping, home values will probably still be up year-over-year. Even with higher interest rates forcing some buyers out of the market, demand will likely continue to outstrip supply because the supply just isn’t there.

Many would-be sellers will likely be unwilling to give up the historically-low interest rates they purchased at or refinanced to for a rate that could be double. We may see an increase in homeowners moving without selling. Instead of giving up the low payment on their previous homes, they’re keeping them and converting them into single-family rentals. With a tenant’s rent covering the mortgage while the owner’s equity continues to grow, this can be a win-win for the seller. For home buyers, though, these are more potentially affordable homes that won’t go on the market. Nonetheless, buyers will probably continue to gain traction in 2023.

Jamison Manwaring, CEO and co-founder of Neighborhood Ventures: 2023 will be the first normal year for housing since 2019. After big run ups in housing costs in 2020 and 2021 followed by 4{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} increase in interest rates to slow the market in 2022, 2023 is set up to be a more normal year as interest rates stabilize and more newly constructed housing units are added. The supply of new units will be offset by the number of homeowners not moving because their interest rate is much lower than a new loan.

New home and multifamily construction projects slated for delivery in 2024 and 2025 will be delayed because the run-up in interest rates have made these ventures less profitable. Housing costs will remain flat and may even decline in some Sun Belt markets. Additional supply of new construction multifamily units will be delivered throughout 2023, mostly in Sun Belt states helping to ease housing costs. These high growth areas have suffered from housing shortages and new supply has been slow due to materials and labor shortages and Covid-related delays. But many of these projects will be delivered during 2023 adding thousands of additional units.

Jack Macdowell, chief investment officer at Palisades Group: Our base case shows housing activity dropping significantly in 2023 due to lower levels of purchase demand and limited housing inventory. At least through the first half of 2023, persistent labor market imbalances created in part by an undersupplied labor force will likely keep inflation elevated and policy rates restrictive. Barring unforeseen events, geopolitical or otherwise, we would expect volatility to subside alongside the Fed reaching the zenith of rate hikes, leaving room for mortgage rates to drop below 6{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb}, and easing the debt service burden for would-be home buyers.

We expect mortgage delinquencies to rise as disposable income levels and consumer savings diminish. However, given the default management toolkit and large amounts of home equity, we are unlikely to see a material increase in foreclosure activity that leads to distressed property sales. 2022 and 2023 will likely be remembered as the years where the housing market sowed the seeds for future pent-up demand as would-be home buyers continue to get forced into the rental market due to affordability pressures. In the absence of new supply added to the housing stock, the release of this pent-up demand could come as soon as 2024.

Lazer Sternhell, CEO of Cignature Realty: The federal fund’s target rate is projected to hit 4.6{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} in 2023, which makes it extremely difficult for investors to evaluate multifamily deals: what will interest rates be at closing, what refinancing events will be available down the line, and what will an exit strategy look like? Investor preference will continue to be focused on free market buildings in prime locations.

Instability in the capital markets and rising interest rates have significantly curtailed multifamily investment activity and higher commercial mortgage rates are sending buyers to the sidelines. Private buyer tolerance for volatility keeps investment activity afloat. If rates stabilize in 2023, institutional investors will provide a further tailwind to the multifamily investment market.

Multifamily’s underlying solid fundamentals over the last 10 years delivered an average annual total return of over 9{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb}. We expect multifamily to perform above average in 2023 despite economic headwinds and ongoing capital market disruptions. Multifamily real estate is one of the best asset classes for hedging inflation. Investors will wait for the multifamily market to stabilize.

Marc Minor, CEO and co-founder of Higharc: 2023 will see the continuation of the suburban migration. Smaller cities will be winners in 2023. As the tussle over remote versus in-office work calms down, Millennials who were previously waiting on the sidelines will settle in — likely not in the major cities they started the pandemic in. More than 900,000 new homes have been built every year for the last 60 years, on average. Most of the new homes being built today are in smaller metro areas. Expect this dynamic to drive housing in 2023 and 2024. New construction homes are going to be brought to market in line with the sturdy pace we were seeing pre-pandemic. It is no secret, the U.S. has a deficit of 3.8 million homes. The strength of demand is there and the need for the construction of new homes has never been higher.

Doug Bibby, president of the National Multifamily Housing Council: Over the coming year, we expect rents to continue to decrease from the heights of the last couple of years, but that demand for apartment homes to remain strong. Indeed, we can be reasonably confident, as research commissioned by NMHC and the National Apartment Association found that as a country we need to build 4.3 million new apartments by 2035. And that, of those 4.3 million apartment homes needed, we already are facing an existing 600,000 apartment home deficit because of underbuilding due in large part to the 2008 financial crisis. Even more worrisome, the number of affordable units (those with rents less than $1,000 per month) declined by 4.7 million from 2015 to 2020. A recent NMHC survey found that while market conditions may be beginning to normalize, the cost of construction and labor, and delays due to permitting and regulations, continue to impede the creation of badly needed housing. Simply put, over the course of 2023 and beyond we need to build and renovate more housing of all types and at all price points in communities across the country.

One trend of particular concern that will unfortunately continue is that lawmakers at the city, state and even federal levels continue to pursue failed policies like rent control to deal with housing affordability challenges. Again and again, rent control has been shown to actually hurt housing affordability – not improve it. As Swedish economist Assar Lindbeck described it, “In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.” Looking ahead, we need real solutions that will actually lower housing costs and spread opportunity. That starts with expanding housing supply. NMHC was encouraged when the White House announced their Housing Supply Action Plan earlier this year and we look forward to continuing to work with the Biden administration and lawmakers in both parties in Congress to implement policies that allow for the development of desperately needed housing.

Rick Goldberg, vice president of sales at Arize: Over the last few years, the multifamily industry has seen record demand and surging rental rates. In a recent survey conducted by Yardi Matrix, the average asking rent rose 7{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} year-over-year, while the national occupancy rate remained strong at 95.6{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} this past October. There is no doubt that multifamily investors and employees are facing ongoing pressures including but not limited to record-breaking inflation, ongoing supply chain constraints, interest rates increasing and resident concerns.

Steven Shores, chairman and CEO of RangeWater Real Estate: The increase in mortgage rates from 3 to 7 percent has dramatically slowed home­ buying. As a result, RangeWater anticipates the demand of rental housing to rise. Both conventional multifamily communities and build-to-rent neighborhoods provide affordable options to meet the needs of an underserved population. As a nation, we are under-housed by 3+ million homes, which even at full production, is a difficult gap to close.

While demand for rental housing should remain robust in the medium to long term, our industry is facing significant headwinds including rising interest rates, inflated construction costs and a slowing economy. For all these reasons, I anticipate 2023 to be a challenging year, but anticipate improvements in late 2023 leading into continuous improvement throughout 2024 into 2025.

Lucas Haldeman, founder and CEO of SmartRent: As the housing market continues to decline in 2023 and mortgage rates are spiking, the demand for housing construction will remain low. Subsequently, employment demand will suffer for home builders. In order to remain competitive, we’ll see home builders offering additional incentives– like rate buydowns, rate locks, and upgrades on kitchen appliances. It’s likely there will also be a rise in spec home offerings in the attempt to increase buyer demand, due to the shortened move-in process in the wake of rates continuing to rise.

Leasing and maintenance teams within the multifamily industry have always had high employee turnover, and in this past year, we’ve continued to see that spike, even reaching all-time highs. This is due to labor shortages and a lack of resources for employees. Proptech will be crucial in employee retention going into 2023, as it allows for the centralization of operations– allowing employees to manage multiple properties by using fewer systems to streamline processes and creating new career paths for existing associates.

Ward Morrison, president and CEO, Motto Franchising, LLC: 2022 ushered in massive changes in the mortgage market. The Federal Reserve upped interest rates which impacted the 10-Year Treasury, rapidly increasing interest rates changed the dynamics of the market, and refis seemingly disappeared overnight shifting the industry to a purchase focus. Looking ahead to 2023, we are already starting to see compression in interest rates. This is due to the spread on the 10-Year Treasury versus consumer rates beginning to shrink and overall lower market risk. As the Federal Reserve tapers and improves consumer confidence in how they are addressing and reducing inflation, the risk premium will likely decrease, and we will have the potential to see rates come down towards the end of 2023.

While supply and demand of home inventory is still off balance, we are beginning to see inventory rise which is putting buyers in a more favorable position than they were in the 2022 seller’s market. In 2023 ,I anticipate we will see a shift to a buyer’s market where sellers will be more apt to work with a buyer to see the purchase through to the finish line. Sellers won’t necessarily want to lower the cost of the home, but they may be willing to offer incentives or seller credits the make the deal more attractive or work with you on products like 3-2-1 or 2-1 Buydowns, or ARMS that meet the needs of your current financial situation. The thing to always keep in mind when shopping for a home is that the market is volatile and “Black Swan” events such as economic, political, and geo-political happenings can change things quickly. Ultimately, the key to home buying success is finding a trusted real estate and mortgage advisor that is prepared to support you in what could be the most complex transaction of your lifetime.

Sean Grzebin, Head of Originations at Chase Home Lending: We’ve seen notable shifts in the market over the last year. While the market may seem daunting right now, it could still be the right time for buyers who are well-prepared financially to take on homeownership. Recent data indicates that we may be headed toward a buyers’ market as inventory increases and prices decline. We expect to see buyers who are financially ready enter the market and become homeowners in 2023. We also anticipate that Black and Hispanic buyers, Millennials and Gen Z, and single women will continue to become more dominant forces in the housing market.

It’s clear that homeownership remains a priority and we expect buyers will make significant efforts to prepare themselves financially. According to our 2022 First-Time Homebuyer Study, 58{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} of consumers said that they are likely to purchase in the next 12 months and 70{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} still see homeownership as an important step to building wealth. Forty-four percent of survey respondents indicated they are confident that they will be financially ready to purchase in the coming year, up 12{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} year-over-year. Many are making lifestyle changes to help them afford homeownership. As an example, we found that two-in-five future homeowners plan to move in with family to help save money, up from one-in-five last year.

Steven Abrahams, head of strategy for Amherst Pierpont Securities – a Santander company: Nominal home prices next year look likely to run flat to slightly positive. But that is well above consensus. The rise in home prices since 2020 and the rise in mortgage rates in 2022 has cut affordability and led to wide expectations that nominal home prices will drop nationally. Estimates vary but commonly range between -5{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} and -15{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb}. But those expectations miss a unique element of the housing market: nominal prices tend to be sticky to the downside. Homeowners that cannot get their target price often stay in the home, take it off the market or even rent it and wait for a buyer. Supply drops as fast if not faster than demand.

The only circumstance where that does not happen is when the homeowner loses the ability to stay in the home—often due to unemployment, a higher rate on an adjustable-rate mortgage or both sufficient to burn through available cash. But homeowners, with one notable exception, usually fund with fixed-rate debt. That helps explain why home prices nationally have run flat or higher in six out of the last seven recessions, through Fed hikes and wide swings in affordability. Home prices famously fell from 2006 and through 2012 after the U.S. adopted a wide range of creative adjustable-rate mortgages and recession pushed up unemployment. At the peak, distressed home sales made up 49{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} of the total. But the housing market today is funded with tightly underwritten fixed-rate debt. Distressed sellers are around 1{171d91e9a1d50446856093950b947460c67b1ae5766d3d173ffede4594e3fbfb} of sales. That should help the housing market avoid another price crash and squeak out a gain in 2023.

Thad Wong, co-CEO of Christie’s International Real Estate and @properties: 2023 will be a significantly better market than what many experts are predicting. There will be some price retraction off the record highs of early 2022, but generally, the next three to five years will be stable, fluid and relatively uneventful — which is exactly what the industry needs, after the last three years. There is an interesting dynamic now between inventory, interest rates and pricing. Inventory needs to stay low enough long enough for rates to ease back down, and I believe that low inventory levels will continue throughout 2023, which will put a floor under pricing. As interest rates move down, we’ll see affordability improve, demand pick up and healthier levels of inventory return. The biggest disappointment among most home buyers, with the exception of entry-level buyers, is not that they can’t afford to buy, but that they missed out on the lowest rates in history. The initial shock of rising rates is already giving way to acceptance, and those that need a home will figure out how to buy at today’s rates.

David O’Reilly, chief executive officer, The Howard Hughes Corporation: Despite market headwinds, this is not a repeat of the housing downturns from the Global Financial Crisis (GFC). Home sales over the past several years have been to end users, not speculators, and new home construction since the GFC has not kept up with household formation—implying a housing shortage of almost 4 million homes nationally. As existing homeowners are locked in with historically low interest rates, they will be reluctant to trade out to today’s higher mortgage rates and potentially downsize their home. Limited resale inventory means new construction is needed to meet the growing demand for housing—and when combined with the undersupply of existing homes, will drive a quick rebound of the housing market in the second half of 2023. We will continue, albeit more slowly, to see migration into the communities that offer an outstanding quality of life—particularly in the Sun Belt and the Southeast, which will create a quicker rebound in those markets.

Brian Carson, CEO at AHF Products, a leader in hardwood flooring: We are primed to see a 20 to 25 percent increase in the number of homes that need to be remodeled in 2023. That’s a reflection of the housing boom 25 years ago, as those homes are now coming of age. Right now, around 20 million homes are between 20 and 40 years old – that’s when older homes get an extreme overhaul and makeover. We can expect the next five to six months to be slower, as high interest rates and inflation take a bite out of disposable spending. But the next five to six years will be extremely strong with a lot of success in the flooring and home renovation industries.

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