The housing market is one of those asset classes that get better with time. Historically, home values rise even if there are stretches in between when the market slows down. For example, in the five-and-a-half decades leading up to 2022, home prices adjusted for inflation climbed higher by 4.23 percent annually, according to statistical data from the U.S. Bureau of Labor.
However, in 2022, the U.S. housing market was up against a perfect storm of economic headwinds, including rising interest rates, high inflation, and the looming threat of a recession.
The housing market can change drastically from year to year. Considering that historical results don’t guarantee future performance, we thought now would be an excellent time to explore the housing market trends and predictions for the next five years: 2023 to 2026.
Housing Market Predictions for the Next 5 Years
Heading into 2023, demand in the real estate market continues to surpass supply, which bodes well for the next five years in terms of market trends and predictions, according to the National Association of Realtors (NAR).
However, there are different perspectives considering the future of the housing market. Let’s get into it.
The 2022 Housing Market Landscape
It has been tough sledding for homebuyers this year. Builders had to contend with the cancellation of construction, mortgage rates were rising, and home sales sunk. However, Realtor.com believes home prices are poised to increase between the end of 2022 and the end of 2023 compared to the NAR’s call for a 2.5 percent increase.
All told, it has been a chilly real estate market in 2022 due to a perfect storm of rising mortgage rates, sellers waiting on the sidelines to list their homes until market conditions improve, and buyers not being able to afford the same home they could afford a year ago.
Housing Market Predictions 2023
Zillow predicts home values will rise by 1.3 percent in the next 12 months ending September 2023. The company also warns that based on the pace of pending home sales activity and mortgage applications, there are “significant downside risks to home sale volumes into 2023”.
CoreLogic Chief Economist Selma Happ suggests that thanks to a combination of depleting housing inventory, easing mortgage rates, and improved economic data, real estate values could stabilize in 2023.
Housing Market Predictions 2024
According to a Zillow survey, the real estate market may revisit pre-pandemic levels in 2024 and first-time home buyers will likely reclaim market share in 2024. We also see that Capital Economics, a world research firm, expects housing prices to increase by 3 percent by the end of 2024.
Wall Street bank Goldman Sachs has issued a forecast for the housing market too. The firm predicts that while U.S. home prices will drop 5-10 percent over the coming year, the market will reach its bottom at the end of 2023. This will lead to leveling prices in 2024, which should stay stable through mid-year. Overall, the bank predicts a slow recovery in housing prices in 2024.
Housing Market Predictions 2025
A 2022 Zillow poll suggests that housing inventories will strengthen by 12 percent in 2025, which would undoubtedly give buyers more leverage. A Zillow survey also found that 13 percent of participants expect homebuyers to be in the driver’s seat in 2025.
Housing Market Predictions 2026
Zillow’s home price expectancy poll of economists and real estate experts shows that most participants expect home prices to rise 46.5 percent in the next four years. A more conservative cohort predicts a more modest 10.3 percent growth in the same period. In addition, a mere 8 percent of poll participants expect the housing market to largely favor homebuyers in 2026.
Will the Housing Market Crash in the Next Five Years?
The last time the housing market crashed was in 2008, when the subprime mortgage crisis emerged, sending the real estate market into a tailspin.
San Jose State University economist Fred Folvary predicted that crisis and believes the housing market is due for a crash every 18 years. According to Folvary, the next housing market crash cycle is expected in 2024, which he says will snowball into a great economic depression in 2026. On the other hand, NAR economists forecast price growth in the housing market in the range of 15-25 percent over the next half-decade.
However, there is no crystal ball in real estate. Five years is like an eternity in the housing market and therefore it is difficult to pinpoint exactly what economic and market conditions will be like.
Will the Housing Market Turn Into a Buyer’s Market in the Next Five Years?
A buyer’s market is created when housing supply outpaces demand, the opposite of the NAR’s predictions for 2023. On the other hand, a seller’s market occurs when demand is stronger than supply, or housing inventory. Some sources are seeing growing evidence that the housing market is already turning into a buyer’s market vs. a seller’s market.
According to a Homelight poll surveying real estate agents, the seller’s market that emerged in 2022 is beginning to fade headed into the new year. Agents say the pendulum has already started to swing toward buyers in terms of prices in the real estate market.
As of the fourth quarter of 2022, nearly one-quarter of real estate agents described the market as a “buyer’s market” compared to the 10 percent of agents who did in the previous quarter.
Is It a Good Idea to Buy a House In the Next Five Years?
The evidence shows that real estate markets can change dramatically in a year. So if you plan to buy a house in the next five years, chances are you will find a sweet spot in the market. If you believe the worst case will come, and another housing crisis will unfold in 2024, then you should act sooner than later.
Otherwise, wait and see how the interest rate plays out. As mortgage rates become more attractive, which, based on the trajectory of policymakers, is expected, pick your spot to get off the sidelines and jump into the market.
There is No Time Like the Present and Total Mortgage Can Help
One thing is clear: the next five years will be exciting in the housing market.
With mortgage rates finally beginning to ease in the U.S. economy thanks to the Federal Reserve slowly taking its foot off the gas pedal, now could be the time to jump in and find your dream home.
Start the application process with Total Mortgage. We have loan experts standing by at our offices around the country and they are ready to help you understand the mortgage rate environment, and how to navigate the changes ahead.
In 2025, the housing market is expected to start picking up again, with home prices rising by approximately 1% to 2% above the current inflation rate. This increase will be due to a combination of factors such as the rise in real incomes, lower mortgage rates, and increased affordability.
A more conservative cohort predicts a more modest 10.3 percent growth in the same period. In addition, a mere 8 percent of poll participants expect the housing market to largely favor homebuyers in 2026.
Things may get better sooner than you think: Fannie Mae predicts that 30-year mortgage rates will average 6.3 percent throughout 2023 before falling to 5.7 percent in 2024. While six-tenths of a percentage point might not sound like much, it can make a big difference in how much house you can afford over the long run.
How much will property prices rise in 5 years? Based on historical averages of 3.5% of home value growth per year, property prices will rise a total of about 18 to 20% in 5 years. The math is simple: 3.5% a year for 5 years, compounding annually.
"Possibly in 2024, but it will depend on the Fed's decisions about raising rates in the second half of the year," says Fleming. "And even if they do go down, it won't be back to the rates of yesteryear. 6% mortgage rates used to be normal, and that's more reasonable to expect too."
30-Year Mortgage Interest Rate Projected Forecast 2025. The 30 Year Mortgage Rate will continue to rise further in 2025. The 30 Year Mortgage Rate forecast at the end of the year is projected to be 16.25%.
According to the CoreLogic HPI Forecast, home prices are projected to continue their upward trajectory. The forecast indicates an expected month-over-month increase of 0.8% from March 2023 to April 2023 and a year-over-year increase of 4.6% from March 2023 to March 2024.
California is set to have the highest average home next decade, with a predicted price of $1,048,100 by September of 2030, if prices continue to grow at the current rate.
Some markets, though, could droop. Analysts believe some of the most popular cities in California could drop in price by 10% overall. In fact, new figures from Redfin show San Francisco home values have already come down 10%, year over year.
Future Plans: If you have plans to buy a new home in the near future, it may be better to wait until 2024 to sell your current home. This way, you can take advantage of any market improvements and get a better price for your home, which could help with the down payment and closing costs of your new home.
These organizations predict that mortgage rates will decline through the first quarter of 2024. Fannie Mae, Mortgage Bankers Association and National Association of Realtors expect mortgage rates to drop through the first quarter of 2024, by half a percentage point to about nine-tenths of a percentage point.
Fannie Mae expects the 30-year fixed to ease to around 6.1% in the second quarter of 2023, before falling to 5.9% in the third quarter and 5.7% in Q4. And it gets even better than that. By the end of 2024, they expect the 30-year fixed to average 5.2%.
After all, capital growth is one of the main reasons people invest in residential real estate. It's often said that over the long-term the average annual growth rate for well-located capital city properties is about 7%, which would mean properties should double in value every 10 years.
“Returning to mortgage rates of 3% or 4% is not going to happen, in my view,” says Yun, who points out that historically rates have been higher. The low rates of 2020 and 2021 were “unique” and those that got them were “lucky,” he says.
The Average US Home Could be Worth $382,000 by 2030
House prices in the US have risen by 48.55% in the last ten years (from $173k to $257k) and if they continue to grow at this rate for another decade, the average US home will be worth $382k by 2030. But across such a vast country, the picture inevitably varies.
Mortgage rates continue to confound expectations. In 2022, rates surged past 7 percent far faster than anyone predicted. Then, in 2023, mortgage rates calmed, leading many observers to predict rates would fall all the way to the low 5 percent range this year.
When will mortgage rates go down? According to Fannie Mae, 30-year fixed mortgages are likely to fall to an average of 4.5% in 2023 from the 5.55% level recorded last June. This would offer significant relief to prospective homebuyers who are affected by today's high prices and rates.
Mortgage Interest Rate predictions for May 2026. Maximum interest rate 4.19%, minimum 3.95%. The average for the month 4.10%. The 30-Year Mortgage Rate forecast at the end of the month 4.07%.
Keep in mind that during an inflationary run it's challenging to predict future mortgage rates. The Mortgage Bankers Association: The D.C.-based trade group projects that the 30-year fixed mortgage rate will average 5.2% in 2023. Beyond this year, the group expects mortgage rates to average 4.4% in both 2024 and 2025.
The squeeze on mortgage costs is set to last until at least 2025 with interest rates expected to rise again this week. Experts have warned that rates are unlikely to start coming down again before the end of next year as inflation remains stubbornly high.
Interest Rates for 2021 to 2027. CBO projects that the interest rates on 3-month Treasury bills and 10-year Treasury notes will average 2.8 percent and 3.6 percent, respectively, during the 2021–2027 period. The federal funds rate is projected to average 3.1 percent.
Based on Zillow's data and CAR's data, the California housing market is expected to experience a slowdown in 2023 and 2024. According to Zillow, the average home value in California is $728,121, down 3.4% over the past year, and homes go pending in around 15 days.
Despite what some may think, 2023 is still a good year to invest in real estate, thanks to advantages like long-term appreciation, steady rental income, and the opportunity to hedge against inflation. Mortgage rates are expected to decline, but the housing market is likely to remain competitive due to low supply.
While the national housing market won't crash, several regional markets may see a decline in home prices in the coming years due to rising interest rates. Higher interest rates could lead to a decrease in affordability, which may result in fewer buyers in certain areas.
How Long do Houses Last on Average? The average life span of a house in the United States is about 50-70 years. Houses can last for decades if they are well-maintained and have been constructed with quality materials. A poorly built home may not last more than 20 years.
New homes in 2050 will be highly energy-efficient – featuring several ways of capturing, storing, and distributing energy. Due to climate change, homes will need to be more responsive to weather events. In addition, better cooling systems will ensure homes don't overheat in the potentially warmer summers.
Houses will be interactive and fully wireless, allowing us to access data from any point. A drive for extensive resource efficiency could see water harvested and recycled within each home. Integrated solar panels and microgen combined with ultra-thin insulation films will allow some houses to come off the grid.
If you need to be occupying your home by a certain date to save on rent, it's a much better deal to close at the end of the previous month (for example, January 30) instead of the beginning of the current month (February 1).
Overall, the Florida housing market is likely to remain strong in 2023, with continued demand for homes and steady price growth. However, the market may begin to stabilize as the growth rate slows down, which may lead to more balanced conditions between buyers and sellers.
For most homeowners, now will be a better time to sell than later in 2023. That's especially true if you live in a market that saw rapid appreciation in recent years. Your real estate agent can help you understand pricing trends in your area, along with available inventory and demand.
Best Price – Home prices are typically at their highest during a time of economic expansion which is the opposite of a recession. If you want to get the highest price for your home, aim to sell the home at a time of economic exuberance.
Long summer days, school breaks and warm temperatures allow you to charge a premium for a home in May, June and July. Expect a bit of a slowdown in August, when many people take their summer vacations.
An interest rate forecast by Trading Economics, as of 12 May, predicted that the Fed Funds Rate could hit 5.25% by the end of this quarter - a forecast that has been materialised. The rate is then predicted to fall back to 3.75% in 2024 and 3.25% in 2025, according to our econometric models.
But average 30-year fixed rates will likely remain somewhere in the 6% to 7% range throughout 2023. For homeowners looking to leverage their home's value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be a good option while we wait for mortgage rates to ease.
As of June 16, 2023, the 30-year fixed mortgage rate is 7.14%, the FHA 30-year fixed rate is 7.13%, the VA 30-year fixed rate is 7.02% and the jumbo 30-year fixed rate is 6.27%.
“[W]ith the rate of inflation decelerating rates should gently decline over the course of 2023.” Fannie Mae. 30-year fixed rate mortgage will average 6.4% for Q2 2023, according to the May Housing Forecast. National Association of Realtors (NAR).
Mortgage experts see rates decreasing over the coming months as the economy slows. Lawrence Yun, the chief economist of the National Association of Realtors, said he expects rates to fall to 5.5 percent by mid-2023.
If you haven't renovated your home in the past 30 years or so, it won't show well when you put it on the market. In other words, it won't get the same price as a similar home that's been maintained and updated.
A new study shows that home prices in the U.S. have increased by nearly 49% in the past 10 years. If they continue to climb at similar rates over the next decade, U.S. homes could average $382,000 by 2030, according to a new study from Renofi, a home renovation loan resource.
Without special care and regular maintenance, their lifespan can reach about 200 years. But even though the materials used in many old houses are designed to last this long, there is still a chance that you will find problems in the structure or foundation.
The total house value should generally be no more than 3 to 5 times your total household income, depending on how much debt you currently have. If you are completely debt-free, congratulations—you can consider houses that are up to 5 times your total household income.
Personal homes will be almost fully independent of a dangerously overtaxed energy grid. One hundred years in the future, our houses will be, in almost all respects, semi-living, artificial organisms—closed systems with a metabolism, sensory apparatus, immune response, and an approximation to a nervous system.
The Average US Home Could be Worth $382,000 by 2030
House prices in the US have risen by 48.55% in the last ten years (from $173k to $257k) and if they continue to grow at this rate for another decade, the average US home will be worth $382k by 2030. But across such a vast country, the picture inevitably varies.
Most experts do not expect a housing market crash in 2023 since many homeowners have built up significant equity in their homes. The issue is primarily an affordability crisis.
Introduction: My name is Dr. Pierre Goyette, I am a enchanting, powerful, jolly, rich, graceful, colorful, zany person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
