The current state of the U.S. housing market can best be described as “complicated.” Rising mortgage rates over the past year have steered many would-be buyers out of the market, leading to softer demand and declining home prices.
But prices are still historically high even after the recent dip — and mortgage rates are historically low despite more than doubling in the space of a year. These trends, combined with uncertainty over an economy that continues to outperform expectations, make it difficult to gauge where the housing market will go.
One thing for certain is that U.S. home prices have fallen from last year’s peaks. In December 2022, average home prices rose 6.9% year-over-year but fell 0.4% on a monthly basis, according to CoreLogic. In addition, Realtor.com reported that median list prices rose 8.4% year-over-year in December, though they were down 11.1% from where they were in June 2022.
Many housing experts expect the market to weaken further in 2023 — but not all do. Here’s a look at six housing trends to know this month:
1. Activity Will Pick Up in the Spring
This is one of the easiest predictions since housing markets almost always see more activity in the spring. That should be especially true this year due to a combination of factors. For one thing, mortgage rates have trended lower the last couple of months, which will have a positive effect on affordability, increase demand and “bring more buyers back into the market,” National Association of Home Builders chief economist Robert Dietz told CNBC.
Meanwhile, a rise in inventory should also bring more buyers back into the market. As CNBC noted, real estate agents have reported an earlier-than-usual surge in open-house foot traffic. Some realtors have even seen a return of bidding wars.
2. Prices Will Continue To Soften…
Analysts at Zillow predict home prices will remain flat nationally and even fall in some sections of the country. Both Freddie Mac and the Mortgage Bankers Association expect modest price average price declines nationally in 2023, Fortune reported. Freddie projects a 0.2% dip, while the MBA sees average prices falling 0.6%.
“We expect house prices to decline modestly, but the downside risks are elevated,” Freddie Mac economists wrote in a report.
3. …Unless They Don’t
Not all housing experts see home prices dipping in 2023. An analysis from Fortune found that the following organizations expect home prices to keep pushing higher this year:
- Realtor.com: Its economics team predicts that the median price of existing homes will rise 5.4%.
- Home.LLC: It expects U.S. home prices to climb 4% in 2023.
- CoreLogic: It expects year-over-year home prices to increase 3% from December 2022 to December 2023.
- National Association of Realtors: The trade group forecasts that home prices will average $385,800 in 2023, an increase of 0.3% compared to 2022.
4. Midwest Markets Should Heat Up
Most Midwestern cities avoided the types of home-price spikes that hit the rest of the country, meaning the region should be ripe for a busy buying season. “With the one-two punch of affordable housing prices and reasonable mortgage costs, [Midwest] states should be at the top of the list for first-time homebuyers,” Zillow analysts wrote in a report.
5. You’ll See More Choices on New Construction
New homes currently under construction have risen 50% since February 2020, according to Zillow, while completed homes are being delivered to the market even amid a slowdown in buyer demand. The oversupply could lead to price reductions in some markets.
6. Mortgage Rates Should Keep Falling
A number of housing/financial experts said mortgage rates have already peaked and will head lower in the coming months. The MBA expects 30-year mortgage rates to end 2023 at 5.2% vs. about 6% currently, Forbes reported. NAR Senior Economist Nadia Evangelou told Forbes that “if inflation continues to slow down — and this is what we expect for 2023 — mortgage rates may stabilize below 6% in 2023.”
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This article originally appeared on GOBankingRates.com: Housing Market: 6 Trends To Know for February 2023
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