At the same time, housing supply remains strapped in many parts of the country and inflation continues to squeeze construction teams. It all begs the question: What will the 2023 housing market mean for buyers, sellers, and homeowners?<\/p>\n
This 2023 real estate market forecast digs into insights from HomeLight top agents and housing market economists, including Ken H. Johnson, Ph.D.<\/a>, a real estate economist and associate dean of graduate programs at Florida Atlantic University; Franklin Carroll<\/a>, VP of analytics and modeling at the Kukun<\/a> and former credit risk analyst for Fannie Mae; and Kurt Buehler<\/a>, a top real estate agent with more than 30 years of experience selling in the Dallas-Fort Worth area.<\/p>\n Here\u2019s how the experts expect the real estate market will move in 2023, along with what those shifts could mean for buyers, sellers, and homeowners.<\/p>\n\n\n\n\n\n Connect with a top-rated local real estate agent for an expert opinion and to get the ball rolling. HomeLight analyzes over 27 million\u00a0transactions and thousands of reviews to help you find the best agent for your needs.<\/p>\n \n In the last few years, the housing market has featured dramatic price hikes and rapid home sales. However, as the Fed attempts to fight back inflation, mortgage rates have marched to recent highs \u2014 with the average 30-year fixed mortgage leaping from 2.68% in December 2020<\/a> to the 6%-7% range<\/a> in December 2022. That could curb demand and pour cold water on hot home prices. As a result, experts believe the 2023 housing market will settle into a new era \u2014 where sales calm down, and prices simmer.<\/p>\n At the same time, high costs are weighing on construction teams, and that could squeeze an already tight housing inventory<\/a> supply. And population increases may strain the housing supply chain even more.<\/p>\n Overall, the housing market is taking on a unique shape in 2023. Here\u2019s a look at what the experts believe these shifts will mean for the housing market in the next year:<\/p>\n In 2023, housing experts expect home prices to inch lower in most areas of the country. However, Carroll says those price declines may be modest overall.<\/p>\n \u201cWe are seeing price declines,\u201d he says. \u201cWe don\u2019t see them as being that large. I\u2019m guessing they will be somewhere between 2% and 5%.\u201d<\/p>\n Dr. Johnson says housing prices in 2023 will likely hinge on each individual housing region\u2019s population growth trends<\/a> and inventory.<\/p>\n \u201cWe think that in some areas of the country, like southeast Florida, we won\u2019t see huge price declines because of the huge inventory shortage and because of the huge increase in demand,\u201d he explains.<\/p>\n On the other hand, Dr. Johnson does say that in areas of the country that don\u2019t have population growth or inventory shortages providing a price cushion, home values could dive more sharply.<\/p>\n \u201cIf there\u2019s not an inventory issue or there\u2019s a minimal inventory issue, with a stable population to declining population, you\u2019re probably going to see significant pricing declines \u2014 not only in the coming year but likely in the coming decade,\u201d he says.<\/p>\n The Federal Open Market Committee raised its benchmark interest rate in December for the seventh time<\/a> in 2022. While the 0.5% hike was smaller than the four-straight 0.75% increases, each upward push of the key federal funds rate can move mortgage rates<\/a> higher. As the Fed continues to try tamping down inflation, high interest rates will likely continue \u2014 or at least stay above 2020 levels in 2023.<\/p>\n Carroll says high mortgage rates will curb demand since new buyers can afford less when their loan rates are high. However, he also says that high mortgage rates could discourage sellers who don\u2019t want to take on a higher mortgage for their next home.<\/p>\n \u201cWhile buyers will be constrained by the fact that they\u2019ll need to pay more on their mortgages, sellers are also going to be constrained by the fact that they\u2019re not going to want to buy a new house with a new mortgage,\u201d says Carroll. \u201cThe main effect is going to be that sales volume just declines.\u201d<\/p>\n Although markets will vary by region, experts expect homebuyers to see more buyer-friendly markets in 2023. HomeLight data found that agents are already seeing the housing market dip into buyer-friendly territory. According to HomeLight surveys, in Q2 of 2022, 95% of top agents<\/a> dubbed their market a \u201cseller\u2019s market.\u201d In Q3, that figure dropped to 51%, and it tumbled to 30% in Q4.<\/p>\n \u201cNo ifs, ands, or buts, I believe we\u2019re going to be in a buyer\u2019s market in 2023 with increased inventories,\u201d says Buehler. \u201cI don\u2019t think we\u2019re going to see a massive decrease in pricing. I think we\u2019re going to see a decrease in transactions.\u201d<\/p>\n That signals a big shift from recent years where home sellers wielded major power. According to the market data website Statista, a record number of homes sold above their bidding price<\/a> during the pandemic \u2014 with as much as 56% of homes selling above their listed price in July of 2021. Buehler says homebuyers can expect that ultra-competitive market to subside in 2023.<\/p>\n \u201cWhen a house was listed back in April or May, it was listed at the right price, but what it sold for was not a market price. What it sold for was a bidding price,\u201d he explains. \u201cWe don\u2019t have that market anymore.\u201d<\/p>\n That means homebuyers could see a kinder market where they can negotiate better deals<\/a> in 2023.<\/p>\n As the market softens, home sellers in some parts of the country may need to readjust their pricing expectations<\/a>. And they should brace themselves for fewer bids and more competition.<\/p>\n As Buehler explains, \u201cThe seller is going to face more competition, so now instead of just sticking their house out there and not prepping it or staging it, they need to get back to the basics of real estate, and that is: present the product.\u201d<\/p>\n And power already appears to be swinging toward buyers. According to HomeLight top agent surveys, 53% of agents<\/a> now say buyers are pushing back on inspection items<\/a>. That\u2019s a 23% increase from the previous quarter. What\u2019s more, that same survey found 77% of agents are seeing contingencies sent back and that buyers are less likely to waive them. That all means sellers will likely need to spend more time negotiating terms as demand slows and buyers gain power.<\/p>\n\n\n\n\n\n We analyze millions of home sales to find real estate agents that sell homes faster and for more money. It takes just two minutes to match you with your personalized recommendations.<\/p>\n \n As demand cools in 2023, homeowners likely will see home values<\/a> peel back. Home appreciation shot up to record highs<\/a> throughout 2021, but appreciation rates slowed in 2022. According to the National Association of Realtors\u00ae (NAR), 80% of metro markets<\/a> reported double-digit annual price appreciation in the second quarter of 2022. That figure slid to just 46% in 2022\u2019s Q3.<\/p>\n Carroll says home values will continue to trend down in 2023 but not at levels that should panic homeowners.<\/p>\n \u201cThere\u2019s going to be a modest decline, but most buyers are still going to have some sort of buffer,\u201d he says.<\/p>\n While many buyers will be intimidated by high mortgage rates<\/a> in 2023, that could open the market up for one specific set of homebuyers: cash buyers.<\/p>\n \u201cCash buyers are going to be the winners,\u201d says Carroll. \u201cPeople who have cash lying around with which to buy a house, they\u2019re going to get a discount. And there\u2019s a sense in which the higher interest rates are going to leave sellers and typical buyers both in a weaker position.\u201d<\/p>\n In 2023, more cash buyers<\/a> and investors may swoop into the market and try to scoop up properties at a discount. In fact, Buehler says he\u2019s already seeing that pattern emerge.<\/p>\n \u201cI just received a cash offer on one of our listings yesterday, and the listing was listed at 3.15K, and the cash offer came in at 2.44K. We would have never seen a cash offer come in like that from an investor a year ago,\u201d he says. \u201cAnd so we’re seeing the cash offers come in much lower than normal.\u201d<\/p>\n Wondering what\u2019s propelling the biggest real estate market trends for 2023? These are a few of the biggest factors the experts say will reshape the 2023 housing market:<\/p>\n In order to cool down an overheated economy, the Fed has decided to raise interest rates. And although the Fed doesn\u2019t directly control mortgage rates, interest rate hikes tend to prop up mortgage rates. Higher mortgage rates mean housing becomes more expensive for borrowers, and that can dampen demand or cause buyers to lower their housing expectations.<\/p>\n States and cities within the U.S. continue to grow at significantly different rates. Going into 2023, population growth is concentrated heavily in the U.S. South and West. According to the U.S. Census Bureau, all 15 of the fastest-growing large cities<\/a> from 2020 to 2021 were in the same five states:<\/p>\n Dr. Johnson says that high demand in areas where populations are booming should catch home prices before they fall significantly. However, in those popular areas, he expects affordability issues<\/a> to worsen in 2023.<\/p>\n \u201cIn places with significant expansion in population and inventory shortage, you\u2019re going to see prices pretty stable,\u201d he explains. \u201cThey could go down a little bit, but I\u2019m pretty confident in saying high population growth with inventory shortages will fare, in terms of property prices, much better than the other extreme \u2014 less of an inventory crisis and less in terms of population.\u201d<\/p>\n Housing inventory is expected to shift in 2023 \u2014 and the number of available units will sway home prices and sales<\/a>. Overall, there is a housing supply shortage that is likely to continue in many markets in 2023. At the same time, as mortgage rates remain high, Carroll says potential home sellers may feel what housing economists have called, \u201cThe Locked-in Effect.\u201d This is a scenario where homeowners decide not to sell their home because they\u2019re worried they\u2019ll need to pick up an overly expensive loan on their next house.<\/p>\n \u201cThere are going to be a lot of people who stay put,\u201d he says. \u201cThey like their present mortgage. They like their mortgage payment. Whatever they gain from moving isn\u2019t going to be enough to compensate for that increase in their mortgage payment.\u201d<\/p>\n Historic inflation<\/a> continues to pile extra financial weight onto U.S. consumers. And unaffordable housing could scare off buyers in 2023. According to the Bureau of Labor Statistics<\/a>, the price of goods and services jumped by 16% over the last five years. Buehler says that potential buyers may be sidelined in 2023 as they\u2019re hit by both high inflation costs as well as high mortgage rates.<\/p>\n \u201cInflation and the interest rates are just outpacing what increases in pay they’ve received, and people can’t afford it,\u201d he says. \u201cSo that’s why we’re seeing the decrease in the number of buyers, and I think that’s why we’re going to see a decrease in the number of transactions.\u201d<\/p>\n\n\n\n\n\n As you look ahead and plan your next move, you can get a near-instant real estate house price estimate from HomeLight for free. Our tool analyzes the records of recently sold homes near you, your home’s last sale price, and other market trends to provide a preliminary range of value in under two minutes.<\/p>\n \n If you\u2019re expecting homes to fly off the shelf in 2023 the way they have in years past, you may want to reset your plans. Carroll says he expects home sales to slow down significantly in 2023.<\/p>\n \u201cThe main effect is going to be that sales volume just declines,\u201d he explains. \u201cDemand is going to drop off. At the same time, the supply of housing available is going to drop off.\u201d<\/p>\n As a whole, Carroll says he suspects housing sales could drop by as much as 20% in the upcoming year. And that downward trend appears to have already started. According to NAR, existing home sales fell by 5.9%<\/a> in October.<\/p>\n Carroll also says reluctant buyers will leave homes sitting on the market longer in 2023 \u2014 upping days on market<\/a>.<\/p>\n \u201cI expect days on market to increase,\u201d he says. \u201c[Sellers] should expect to get slightly less for their house and to have to market it longer.\u201d<\/p>\n With so much changing in the housing market, it\u2019s natural for homebuyers and sellers to wonder, \u201cWill there be another housing market crash?\u201d Carroll says that even if home prices trend downward, he doesn\u2019t expect a major crash in 2023.<\/p>\n \u201cI don\u2019t think there\u2019s reason for anybody to panic,\u201d he says. \u201cI don\u2019t think we\u2019re going to see the sort of massive declines and foreclosures that were part of the bubble last time.\u201d<\/p>\n Even if there\u2019s a significant market correction in parts of the country in 2023, experts agree that price corrections within the housing market will vary from one region to the next. This is what the experts say home sellers, buyers, and homeowners can plan for in 2023:<\/p>\n For home sellers, the market is likely to soften in many areas. As interest rates stay high, and buying a home becomes more expensive for many, there are a few things home sellers can expect:<\/p>\n Thinking about selling soon? We’d be happy to introduce you to a few top local real estate agents. Our service is 100% free, with no catch. Agents don’t pay us to be listed, so you get the best match.<\/p>\n \n ![\"homelight](\"https:\/\/www.homelight.com\/blog\/wp-content\/themes\/ccprototypev5\/images\/logo-small-cta.png\"){kind=logo}
\n <\/div>\n \n Buying or Selling? Start With a Top Agent<\/h3>\n
What to expect from the housing market in 2023<\/h2>\n
High home prices will likely dip, but may not fall<\/h3>\n
Mortgage rates will dampen supply and demand<\/h3>\n
Homebuyers will gain an edge<\/h3>\n
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The seller is going to face more competition, so now instead of just sticking their house out there and not prepping it or staging it, they need to get back to the basics of real estate, and that is: present the product.<\/q>\n
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Home sellers will need to reset their expectations<\/h3>\n
\n <\/div>\n \n Find a top real estate agent near you<\/h3>\n
Homeowners could see appreciation dip<\/h3>\n
Cash buyers may secure an advantage<\/h3>\n
What will drive real estate market trends in 2023?<\/h2>\n
Interest rates<\/h4>\n
Population Growth<\/h4>\n
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Housing inventory<\/h4>\n
Inflation and affordability<\/h4>\n
\n <\/div>\n \n How Much Is Your Home Worth Now?<\/h3>\n
How fast (or slow) will homes sell during the rest of 2023?<\/h2>\n
How will housing trends impact homebuyers and sellers?<\/h2>\n
What home sellers can expect<\/h3>\n
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\n <\/div>\n \n Sell your house faster and for more<\/h3>\n