2023 Housing Price Predictions: More Bears Than Bulls

2023 Housing Price Predictions: More Bears Than Bulls
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Forecasts of housing prices for 2023 by various institutions range from -22% to +5.4%. There is no consensus on which direction house prices will go. However, the bias is towards the downside.

There’s also the matter of forecasting the national median home price and the price of your local housing market. While we care about the national median home price forecast, we do care way more about our local housing market forecast.

For background, I was expecting the average selling price in the US In 2022, it will increase by 8% – 10%. My estimate was less bullish than most firms expecting a 12% to 18% price increase.

The median home price in Q4 2021 was $423,600. The most recent price data available, Q3 2022, shows a median home price of $454,900, or an increase of 7.4%. Housing price data for the 4th quarter of 2022 will be released in the 1st quarter of 2023.

Average sales price of homes sold in the United States

2023 Housing Price Forecasts

Take a look at housing price predictions for 2023 from some popular real estate or real estate agencies. They are everywhere!

All housing price forecasts are subject to change over time as data points and conditions change. I will update the changes as they happen.

2023 Housing Price Forecasts

The lowest housing forecasts for 2023

John Burns Real Estate Consulting (JBREC): -20% -22%

Probe: -10%

Goldman Sachs: -5% -10%

Redfin: -4%

Top housing price predictions for 2023 +5.4%

CoreLogic: +4.1%

National Association of Realtors: +1.2%

The Most Boring Housing Price Predictions for 2023

Fannie Mae: -1.5%

Freddie Mac: -0.2%

MBA: +0.7%

Zillow: +0.8%

My Thoughts on Extreme Housing Price Predictions

When it comes to forecasting, it’s best to look at the tail ends first. It helps to see who is a dreamer and whether you have any blind spots.

Most Bear Call

I like the work of John Burns Real Estate Consulting (JBREC). However, they are very pessimistic, predicting a -20% to -22% decline in house prices in 2023. A 20% drop in median home prices would lower the national median home price by about $364,000.

A 20% to 22% price drop would mean a LARGER drop than during the global financial crisis. Median home prices decreased from $257,000 in Q1 2007 to $208,400 in Q1 2009, or -18.9%. Additionally, the 18.9% decline in national median home prices took two years.

It is unlikely that the national median home price will fall further than it did during the global financial crisis half the time. Lending standards are much higher than they were before the 2008 crisis. Meanwhile, the vast majority of homeowners have kept their mortgage rates below 5%.

If we say this housing recession is 30% as bad as it was in 2007-2009, then we get a -5.7% decline in housing prices.

Most Bull Challenge

On the other hand, Realtor dot com has a housing price forecast of +5.4%. Realtor dot com is a website that helps you find a realtor to buy or sell a home. The Realtor pays an application fee for closed transactions. How powerful housing marketmore business will create Realtor dot com.

Not coincidentally, CoreLogic (+4.1%), National Association of Realtors (+1.2%), Mortgage Bankers Association (+0.7%) and Zillow (+0.8%) have higher averages in 2023 looking for house prices. I fear they suffer from the bias of the business sector.

With a Fed-induced recession and higher average mortgage rates in 2023, I believe that every forecast showing an increase in housing prices in 2023 is wrong. Housing prices are not leading, they are lagging behind.

My 2023 Housing Price Forecast

With a 75% conviction rate, I expect the median home price to drop 8% to $419,000 in 2023. I believe that the average house price in 2022 in St. Louis Fed dates.

Reasons include:

  • Global recession by the end of 2023
  • The Fed insists on raising the terminal rate from 5% to 5.125% even though inflation is clearly down and below 2%
  • A higher risk-free rate makes investing in risky assets less attractive

An 8% drop in housing prices is disappointing real estate owners. However, real estate has outperformed the S&P 500 by more than 25% in 2022. 8% back isn’t too bad, esp bought responsibility or very little mortgage left.

Here are the reasons I don’t expect house prices to fall more than 8%:

  • 30-year fixed mortgage rates should fall 2-3% from a peak of 7% by mid-2023. 4% to 5% 30-year fixed mortgage rates should drive demand back.
  • The Treasury bond market has stopped listening to the Fed. The 10-year bond yield is unchanged after the Fed raises rates by another 50 bps on December 14, 2022. great profitable investment Between 10-year and 3-month Treasuries, the Fed says it’s wrong. And retail mortgage rates are generally priced below the 10-year bond yield.
  • Thanks to big stimulus spending in 2020 and 2021, consumers still have “excess” savings.
  • The minority of men will continue. The vast majority of homeowners have 30-year fixed mortgage rates below 5%. Therefore, many do not need to sell.
  • Capital will continue to move towards and away from real assets funny money assets like stocks, cryptocurrencies and anything that provides zero benefits.
  • The average credit score for new mortgage borrowers is above 720.
  • There is a large amount of home equity built up over the years. Starting in 2008, home prices would have to fall by more than 40% to have the same proportion of flooded homes.
home equity vs. home debt - a large amount of home equity means the housing market is unlikely to crash

Downside Risks to a Negative Housing Price Forecast: Desperation

One of the biggest unknowns is how much new housing supply will hit the market during the traditionally strong spring season. If there are too many desperate sellers, we could see house prices fall by more than 8%.

There are also unusual scenarios where the house is too expensive and becomes an “old fish”. You may also encounter highly motivated sellers who are going through a divorce. One short sale can destroy the value of dozens of neighboring homes.

The latest US single family home inventory
2023 inventory could still be at least 20% lower than 2015-2020

The other major downside risk to my negative housing price forecast is a more aggressive Fed. Even if the Treasury bond market stops believing in the Fed, the 5.125% Fed Funds rate will squeeze consumer debt borrowers. Everything from credit card rates to car loan rates will increase.

A minority of borrowers who are stretched thin can hurt the majority who are financially sound. Even during the global financial crisis some of the elites even though they had money, they decided to stop paying their mortgage.

It’s easy to see prices drop 8%+ in your local housing market, especially if your housing market had its strongest gains in 2020 and 2021. The Fed remains hawkish.

The Biggest Risk to My Negative Housing Price Forecast: Hidden Wealth

I underestimate the amount of liquid wealth of potential buyers keeps secret. Additionally, if mortgage rates fall 2% to 3% in 2023, I may be underestimating how much demand will return to the housing market.

I personally have a lot of money and short-term treasury bonds. So are all my friends. I have a feeling that many Financial Samurai readers also have large sums of money.

If many of us will be looking to buy and sell homes in 2023, will home prices really fall by the 8% I predict? Maybe not.

When it comes to housing prices, prices tend to go up faster than they go down real estate FOMO. So buyers may only have a six-month window to take advantage of the big price cuts.

The rise of credit score mortgages - Since the financial crisis, most new mortgages have been to borrowers with credit scores above 720.

Mortgage Demand Is Highly Sensitive to Even Higher Interest Rates

Take a look at this graphic below. As the average 30-year fixed rate fell from 7.1% in October 2022 to 6.3% in mid-December 2022, it shows an increase in mortgage purchase applications. 6.3% is still higher than a year ago. However, mortgage purchase applications were still up 13.8%. This is surprising during the slow winter months.

So if mortgage rates fall to 4%-5% by mid-2023, perhaps we’ll see an increase in mortgage applications of over 25%. The longer the inactivity in real estate transactions, the greater the reduced demand.

increase demand for real estate as mortgage rates fall

There Will Always Be Opportunities

Real estate continues to be mine favorite asset class for wealth creation for most people.

In 2023, even if all my properties decline by an average of 10%, I won’t care because I won’t feel it. I will continue to raise my family primary residence. Then I will continue to collect my rental income to help pay for our lifestyle.

An asset that provides both income and utility is the best type of asset class to own. However, having headaches, maintenance issues and property taxes can get to even the most patient of real estate investors. As a result, diversification of investments in stocks, personal real estatebonds and alternatives that provide truly passive income are recommended.

If you want to buy real estate in 2023, there will be plenty of opportunities to do so at more affordable prices. The combination of falling housing prices and mortgage rates will make real estate more attractive. Mid 2023. be patient

When that time comes, I hope no one bids against me. To be able to get my current money eternal man It was ideal after the lockdowns started on March 18, 2020. I would easily pay 4% more if I faced the competition.

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Reader Questions and Suggestions

Readers, what are your housing price predictions for 2023 and why? Planning to hunt for deals in 2023? What will make you sell your property in 2023?

If you’re looking for a more surgical approach to investing in real estate, take a look fundraising. I just had an hour-long conversation with Fundrise CEO Ben Miller. Its income fund generates 8%+ returns. In addition, Fundrise uses its existing cash to hunt down difficult deals with 12-14% returns. Our views on housing prices in 2023 are very similar.

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