Something big is happening in the U.S. housing market—here's where 27 leading research firms think it'll take home prices in 2023 (2024)
The U.S. housing market is no exception. The streak of 124 consecutive months of positive home price growth, a period spanning from the bottom of the previous bust in February 2012 to the top of the Pandemic Housing Boom in June 2022, has been replaced by a new streak: four consecutive months of U.S. home price declines.
Between June and October 2022, U.S. home prices as measured by the Case-Shiller National Home Price Index fell 2.4%. On the one hand, that’s already big enough to count as the second-biggest home price correction of the post-WWII era. On the other, it’s mild compared to the once-in-a-lifetime 26% correction that occurred between 2007 and 2012.
Back in May 2022, Fortune told readers that “something big” was happening in the U.S. housing market as spiked mortgage rates would soon send housing activity plunging. Once again, we would say something big is happening, to describe a U.S. housing market that has clearly slipped into deflationmode.
The question heading forward is just how much ofthe Pandemic Housing Boom’shistoric 41%-plus jump in U.S. home prices—which has slipped to 38% as of October 2022—will get erased?
To get a better idea of what’s coming fornationalhome prices in 2023,Fortunetracked down the latest housing forecasts from 27 of the nation’s leading housing researchers. Of that group, four expect U.S. home prices to grow in 2023, while the other 23 believe U.S. home prices have further to fall.
Below we present those 27 home price predictions—they’re ordered from most bullish to most bearish.
Realtor.com:The economics team atRealtor.com predicts that the median price of existing homes will rise 5.4% in 2023 while mortgage rates average 7.4%. "The slowdown in home sales transactions that began as mortgage rates surged in 2022 is expected to continue, leading to a moderation in home price growth and tipping housing market balance away from sellers," write researchers at Realtor.com.
Freddie Mac:The firm's forecast modelhas U.S. home prices falling 0.2% in 2023 while mortgage rates average 6.4%. "We expect house prices to decline modestly, but the downside risks are elevated," write Freddie Mac economists.
Mortgage Bankers Association:The firm's latest forecast has U.S. home prices, as measured by the FHFA US House Price Index, falling 0.6% in 2023 and another 1.2% dip in 2024. The group also forecasts average mortgage rates of 5.2% in 2023 and 4.4% in 2024. "Inventories of new homes are increasing at the same time that demand has remained quite weak, and more builders appear to be offering price cuts as well as other concessions to move properties," write researchers at the Mortgage Bankers Association.
Fannie Mae:Economists at the firmpredict that U.S. home prices, as measured by the Fannie Mae HPI, will fall 1.5% in 2023 and another 1.4% dip in 2024. Fannie Mae is currently modeling an average 30-year fixed mortgage rate of 6.3% in 2023 and 5.6% in 2024.
Redfin:The firm's baseline forecastpredicts that the median U.S. home sales price will fall 4% in 2023. "Prices would fall more if not for a lack of homes for sale: We expect new listings to continue declining through most of next year, keeping total inventory near historic lows and preventing prices from plummeting,"writes Redfin.
Amherst:The real estate investment firm, which owns a massive portfolio of single-family homes, tellsFortunethat its forecast model has U.S. home prices falling 5%between September 2022 and September 2025. “Incomes are the other side of the seesaw from mortgage rates in setting home prices. We saw no middle-income wage gains for decades. Now it’s happening big-time. Higher rates are a headwind, but rising incomes are a huge support and tailwind," Sean Dobson, CEO of the Amherst Group, tells Fortune.
Wells Fargo:Thebank's forecast model has U.S. home prices falling 5.5% in 2023. "Markets where home prices shot the highest are now vulnerable to a disproportionate swing to the downside, notably in previously white-hot markets in the Mountain West which saw an influx of remote workers at the onset of the pandemic. Home prices in desirable locations with comparatively tighter supply are likely to hold up much better,"write Wells Fargo researchers.
ING:Peak to trough,the Dutch bank tellsFortune it expects U.S. home prices to fall between 5% to 10%. However, the multinational lender says U.S. home prices could possibly decline by as much as 20%. "The housing market downturn, triggered by rapid increases in mortgage borrowing costs, continues to cause us significant concern. Prices have risen hugely over the past couple of years as demand vastly outstripped limited supply of homes, but this process is going into sharp reverse with mortgage applications for home purchases falling by nearly 50% on the 3Q 2020 peak. At the same time there is more supply appearing on the market and the risk we see a steep correction in prices," writes James Knightley, chief international economist at ING.
Bill McBride:McBride, a housing analyst and author of the Calculated Risk blog, expects U.S. houseprices to fall by around 10% from the 2022 peak. "Since national house prices increased very quickly during the pandemic—up over 40%—it seems likely that some of the usual stickiness will not apply. I think the most likely scenario now is nominal house prices declining 10% or more from the peak, and real [adjusted for inflation] house prices declining 25% or so over the next five to seven years,"writes McBride.
Keller Williams Realty: Ruben Gonzalez, the chief economist at Keller Williams Realty, expects median home prices as tracked by NAR to fall 10% from top to bottom. "I suspect we will see the trough in the first half of [2023]. Perhaps March or April but that is dependent on the path of interest rates which have been quite volatile recently," Gonzalez tells Fortune.
Morgan Stanley:The Wall Street bankexpects home prices to fall by around 10%between June 2022 and the bottom in 2024. If mortgagerates fall by more than expected, Morgan Stanley researchers say that the peak-to-trough decline will come in closer to 5%. However, if a "deep" recession manifests, Morgan Stanley predicts U.S. home prices could crash 20% from top to bottom, including up to an 8% home price decline in 2023 alone. "The fact that we expect home prices to start falling on an annual basis in March 2023 despite tight inventory reflects how unprecedented this affordability situation is in the U.S. housing market… However, although supply doesn't keep home price growth floored at zero, we do believe it prevents home price declines from becoming too large," writes Morgan Stanley researchers.
Moody's Analytics:The firmexpects a peak-to-trough U.S. home price decline of 10%. If a recession were to manifest, Moody's would expect a top-to-bottom home-price drop of 15% to 20%. “Affordability has evaporated and with it housing demand… Prices feel a lot less sticky [right now] than they have historically. It goes back to the fact they ran up so quickly [during the pandemic], and sellers are willing to cut their price here rapidly to try to close a deal," Mark Zandi, chief economist at Moody’s Analytics, tellsFortune. (You can find Moody's latest forecast for 322 marketshere.)
Zelman & Associates:Back in the summer,the boutique housing research firm forecastedthat U.S. home prices would fall 4% in 2023 and another 5% in 2024. According to the Wall Street Journal, the firm now expects U.S. home prices to fall 12% between the 2022 top and the 2024 bottom.
AEI: Ed Pinto, director of AEI Housing Center, tells Fortune that he expects U.S. home prices to fall 15% to 20% from peak to trough. Pinto expects prices to bottom out in 2023 or 2024.
CoStar: Peak to trough, CoStar CEO Andy Florance expects U.S. home prices will fall by around 20%. "People who think a 10% drop [in home prices] are dreaming… 20% is more comfortable," Florance tells Fortune.
KPMG:The Big Four accounting firm expects U.S. home prices, as measured by the Case-Shiller home price index, to fall 20% between the fourth quarter of 2022 and the fourth quarter of 2023. “It was a pandemic-induced [housing] bubble, which was stoked by work-from-home migration trends: high-wage workers going to lower second-tier middle markets for more space… Once you start the process of prices falling nationally, there is a self-fulfilling momentum to it, because no one wants to catch a falling knife," Diane Swonk, chief economist atKPMG,tellsFortune.
Yieldstreet: By the third quarter of 2023, Yieldstreet expects U.S. home prices to be 20% below its 2022 peak. "Obviously, some markets will be less impacted. Markets that'll be more impacted are the ones where you have a lot of inventory of new homes, like Phoenix, Las Vegas, Dallas, and Boise. These are markets with a lot of construction, with a lot of new homes… Those are the markets that'll be the leaders in terms of how much home prices decline. There will be some markets in the Northeast, which haven't had a lot of new construction, where home prices are expected to fare better in terms of declines," Tejas Joshi, director of single-family residential at Yieldstreet, tellsFortune.
John Burns Real Estate Consulting:Peak to trough,the real estateresearch firm's revised forecast has U.S. home prices falling 20% to 22%. That forecast is based on the assumption that mortgage rates stay relatively close to 6% through 2023. "Investors accounted for the highest percentage of buyers ever this cycle in many markets. Lion's share of those [investor] buyers are now on the sidelines, with some needing to sell given overleveraged and really were just taking a flyer on home price appreciation continuing to rip higher. Those days are now over, and these sellers don't exhibit the same emotional and behavioral qualities associated with traditional owner-occupiers, which historically keeps home prices somewhat sticky on the downside," RickPalacios Jr, the firm's director of research, tellsFortune.
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Fannie Mae: Economists at the firm predict that U.S. home prices, as measured by the Fannie Mae HPI, will fall 1.2% in 2023 and another 2.2% dip in 2024. That's a big upgrade from March, when Fannie Mae predicted national home prices would fall 4.2% in 2023 and another 2.3% dip in 2024.
Although home prices are expected to improve in the second half of the year, the California median home price is projected to decrease by 5.6 percent to $776,600 in 2023, down from the median price of $822,300 recorded in 2022.
Homebuyer.com data analysis indicates that, for first-time home buyers, June 2023 is a good time to buy a house relative to later in the year. This article provides an unbiased look at current mortgage rates, housing market conditions, and market sentiment.
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.
Description: The baseline forecast is for growth to fall from 3.4 percent in 2022 to 2.8 percent in 2023, before settling at 3.0 percent in 2024. Advanced economies are expected to see an especially pronounced growth slowdown, from 2.7 percent in 2022 to 1.3 percent in 2023.
BENGALURU, May 31 (Reuters) - U.S. home prices will decline less than previously expected this year before stagnating in 2024, despite widespread expectations interest rates will remain higher for longer, according to property analysts polled by Reuters.
With mortgage rates declining faster than expected, home prices are likely to remain mostly flat throughout 2024. This will be good news for buyers who have been waiting on the sidelines for a good time to enter the market.
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. Figures are the predicted quarterly average rates for the 30-year fixed-rate mortgage.
So far in 2023, the Fed raised rates 0.25 percentage points twice. If they hike rates at the May meeting, it is likely to be another 0.25% jump, meaning interest rates will have increased by 0.75% in 2023, up to 5.25%.
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).
What happens to my mortgage if the housing market crashes? A housing market crash won't affect your existing fixed-rate mortgage. However, if the value of your home drops below your purchase price, then you'll be making payments that are greater than the worth of your property.
Before a recession hits, home prices are typically at an all-time high. This means that selling your home before a recession will result in a higher profit between the purchase price of the real estate and the sale price, which can increase your capital gains taxes.
Real estate can be an asset class with high returns. It also usually offers a hedge against inflation. Since real estate has historically been inversely correlated with conventional assets, it can be a good way to diversify your investments away from the stock market.
2023 is a great time to start investing. But so was 2022. The key point is that over the long term, investments generally do grow in value, even if there is some early volatility. It is far better to invest now, whenever now happens to be, rather than waiting for some ideal future opportunity.
We forecast real GDP growth of 0.9% in 2023 and 0.8% in 2024, and headline CPI inflation of 4.0% and 2.8%, respectively. With ongoing credit tightening and a broad-based slowdown, we look for the Fed to lift its policy rate once more in May to a range of 5.00-5.25% before a pause into 2024.
After peaking at 6.2% in 2022, we expect inflation to fall to 3.5% for 2023. Over 2024 to 2027, we expect inflation to average just 1.8%—below the Fed's 2% target.
The world population is expected to reach 8.5 billion people by 2030. India will overtake China as the most populated country on Earth. Nigeria will overtake the US as the third most populous country in the world. The fastest-growing demographic will be the elderly: 65+ people will hit one billion by 2030.
Even so, Evangelou doesn't expect mortgage rates to go back to 3% anytime soon but notes that even fixed mortgage rates below 6% will still be less than the historical average of roughly 8%. Other experts agree that rates will likely come down in the next few years.
The predictions made by the various analysts and banks provide insight into what the financial markets anticipate for interest rates over the next few years. Based on recent data, Trading Economics predicts a rise to 5% in 2023 before falling back down to 4.25% in 2024 and 3.25% in 2025.
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.
After falling in 2023 and 2024, home prices are predicted to plateau in 2025 before rising again at just above the rate of inflation. However, due to the spike in home values from 2020 through 2022 due to record-low mortgage rates, median sales prices will take at least until 2027 to regain the highs of mid-2022.
Winter is usually the cheapest time of year to purchase a home. Sellers are often motivated, which automatically translates into an advantage to you. Most people suspend their listings from around Thanksgiving to the New Year because they assume buyers are scarce.
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.
“We expect that 30-year mortgage rates will end 2023 at 5.2%,” the organization noted in its forecast commentary. It since has walked back its forecast slightly but still sees rates dipping below 6%, to 5.6%, by the end of the year.
The only exception is California, he says, where the market could see 10 percent declines: “Because it's so expensive, California is always the most vulnerable to changes in interest rates.” Overall, in five years, he expects prices to have appreciated a total of 15–25 percent.
'I believe by the end of 2023 we will see rates start to fall with a target of between 2.5 to 3 per cent in 2024. 'I believe if the base rate can get back to circa 2.5 per cent, then we will see rates hovering around that mark with a return to products that have not been seen in the mortgage industry for some time.'
In general, a staged home will sell quicker than a non-staged home, and at a higher price too! 95% of staged homes sell in 11 days or less, and a staged home will sell for 17% more than a non-staged home.
Too much visual interest can create a dizzying effect. When it comes to accessories, follow the “3-to-5-foot” rule for surface décor and knickknacks: surfaces in the 3-foot to 5-foot range, such as coffee tables and credenzas, should have the right balance of accents but be clear of clutter.
Staging an empty house is just as important as staging a fully furnished one. It might even be a bit easier to do since there's no need to depersonalize the space or find somewhere to hide any clutter. The goal when you stage a home without furniture is to highlight those features that you do have.
Both estimates are largely in line with fresh projections from officials in March. The Fed penciled in a 5-5.25 percent peak interest rate for 2023, after which officials see rates falling to 4.25-4.5 percent by the end of 2024.
When it becomes more attractive to save money, consumers tend to spend less of it. But the Fed isn't done fighting inflation. And because of that, consumers should not expect interest rates to drop in 2023. However, rates may also not climb much from where they are today.
Saturday and Sunday are typically the best days for open houses. If you plan a weekday open house, consider holding it from 4pm to 7pm. You're likely to attract potential buyers who want to avoid rush hour or commuter traffic.
As prices become unsustainable and interest rates rise, purchasers withdraw. Borrowers are discouraged from taking out loans when interest rates rise. On the other side, house construction will be affected as well; costs will rise, and the market supply of housing will shrink as a result.
The median price for a U.S. home sold during the fourth quarter of 2008 fell to $180,100, down from $205,700 during the last quarter of 2007. Prices fell by a record 9.5% in 2008, to $197,100, compared to $217,900 in 2007. In comparison, median home prices dipped a mere 1.6% between 2006 and 2007.
Redfin deputy chief economist Taylor Marr expects about 16% fewer existing home sales in 2023 vs 2022. Marr believes potential buyers are still grappling with affordability, high mortgage rates, high home prices, inflation, and a potential recession.
It's also worth noting that while foreclosure rates are up year-over-year, experts do not expect to see a wave of foreclosures in 2023, even where home values are depreciating, as many homeowners have substantial equity due to progressive home price appreciation in recent years.
There's no official correlation between stock market performance and housing prices. However, overall economic indicators that result from a stock market crash can often reverberate to the property market once stocks dip below 20%.
When things are looking bleak, consider holding on to your investments. Selling during market lows can be one of the worst things you can do for your portfolio — it locks in losses. When the market evens out down the road, rebalancing may be in order.
Panic selling, when the stock market is going down, can hurt your portfolio instead of helping it. There are many reasons why it's better for investors to not sell into a bear market and stay in for the long term.
In 2023, economic activity is projected to stagnate, with rising unemployment and falling inflation. Interest rates are projected to remain high initially and then gradually decrease in the next few years as inflation continues to slow.
A majority of economists forecast a recession for the U.S. in 2023 – 58 percent, according to a survey from the National Association for Business Economics (NABE) released earlier this week on March 27.
Despite the fact that there are some troubling trends in the housing market, we're likely not going to see a crash in 2023 or 2024. While house prices are likely to drop, demand for housing caused by America's ongoing housing shortage is likely to keep prices relatively stable.
The threat of a U.S. recession remains alive in 2023. The consensus estimate on the probability of a meaningful downturn in the American economy in the next 12 months is at 65%, according to Goldman Sachs Research. But our own economic analysis rates that probability much lower, at 35%.
Many economists agree that the U.S. is, for now, not in a recession. The most recent gross domestic product report published last week showed the U.S. economy grew by 2.9% in the fourth quarter of 2022, following growth of 3.2% in the quarter before.
During a traditional recession, the Fed will usually lower interest rates. This creates an incentive for people to spend money and stimulate the economy. It also typically leads to more affordable mortgage rates, which leads to more opportunity for homebuyers.
Almost two-thirds of chief economists believe a global recession is likely in 2023; of which 18% consider it extremely likely – more than twice as many as in the previous survey conducted in September 2022. A third of respondents consider a global recession to be unlikely this year.
“The current and projected market conditions are in favour of owners of Dubai residential properties if they are thinking to sell or rent their units as demand for ready property outperforms supply, especially in sought-after locations,” says Nikita Kuznetsov, Partner Metropolitan Group and CEO of Metropolitan Premium ...
Chicago, IL MSA: The forecast for the Chicago MSA suggests a moderate increase in housing prices. In May 2023, prices are predicted to rise by 0.3%, followed by a slight growth of 0.1% in July 2023. However, the most significant increase is expected in April 2024, with prices projected to rise by 1.5%.
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