What to expect next from the housing market (2024)
Heading into 2023, most housing analysts were on the bearish side. Among the 27 major forecasters, 23 expected national home prices to fall in 2023 under the weight of spiked mortgage rates. However, through the first few months of 2023, these bearish views haven’t manifested.
As demand improved back in January, many housing analysts began to revise their home price outlooks upward for 2023. Look no further than Fannie Mae, which came into 2023 expecting national house prices to fall 4.2% in 2023. However, Fannie Mae now expects just a 1.2% national house price decline this year.
To better understand where national home prices might head next—and if the housing market can remain stabilized as it moves into the slower seasonal period this summer and fall—Fortune rounded up revised forecasts from nine major research firms.
CoreLogic: The real estate research firm expects U.S. home prices, as measured by the CoreLogic HPI, to rise 4.6% between March 2023 to March 2024. If CoreLogic is right, then U.S. home prices would end 2023 back at price levels achieved at the height of the boom in June 2022. "While housing markets across the country continue to send mixed signals, prices in many large metros appeared to have turned the corner," wrote Selma Hepp, chief economist for CoreLogic, in a report published earlier this month. (Forecast updated on May 2, 2023.)
Zillow:Economists at the home listing site forecast that U.S. home values, as measured by the Zillow Home Value Index, will rise 1.7% between March 2023 and March 2024. "April data indicate that housing has returned to a seller’s market. Buyers flock to open houses at this time of year in hopes of securing a home in time to move in by early summer, yet this year will see far fewer new listings than normal, too," wrote Zillow economists in a report published on Monday. Here is Zillow's regional outlook for over 300 markets. (Forecast updated in April 2023.)
Bank of America: Economists at the investment bank forecast that U.S. home prices will shift 0% in 2023. "We project flat growth for 2023 as we reach close to equilibrium levels in terms of constrained affordability meeting reduced supply... Areas of concern: Phoenix, Austin, Las Vegas -> Significant supply coming online with USPS data showing some outward migration," wrote BofA economists in a report published earlier this month. (Forecast updated on May 1, 2023.)
Mortgage Bankers Association:The trade group's latest forecast has U.S. home prices, as measured by the FHFA US House Price Index, falling 0.6% in 2023 and another 1.4% dip in 2024. It then expects national home prices to rise 2.1% in 2025. (Forecast updated on April 17, 2023).
Fannie Mae:Economists at the firmpredict 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. "Housing demand and home prices have proved more resilient than previously anticipated…this is due in large part to the “lock-in effect," in which existing homeowners are disincentivized from listing their homes and potentially giving up their lower mortgage rate," wrote Fannie Mae economists in a recent report. (Forecast updated on April 10, 2023.)
Morgan Stanley: The investment bank expects U.S. home prices to fall 4% in 2023. "In November, the [Morgan Stanley] housing team published a home price forecast calling for a decline of 4% this year. On balance, the incoming data have roughly tracked that forecast. A record-breaking decline in housing activity has not come with a commensurate drop in home prices—something that has also underpinned our generally optimistic outlook for both consumer balance sheets and consumer spending in the post-Covid recovery. Lack of supply has been the main factor underpinning home valuations," wrote Morgan Stanley in a report published in April. (Forecast affirmed on April 21, 2023.)
Moody's Analytics:The firm expects U.S. home prices, as measured by the Moody's Analytics Repeat Sales House Price Index, to fall 4.4% between the fourth quarter of 2022 and the fourth quarter of 2023. In total, Moody'smodel expects a peak-to-trough U.S. home price decline of 8.6%. (Updated forecast provided to Fortune in May 2023.)
Goldman Sachs:The investment bank expects U.S. home prices, as measured by Case-Shiller, to fall 6% in 2023. "Housing affordability has been a key determinant of regional home price variance; even with falling Treasury yields, affordability levels in underperforming [Western] markets remain very poor. In our view, metro-level home prices will be more instructive than national prices when monitoring mortgage credit stress," wrote Goldman Sachs researchers in a recent report. (Forecast updated on April 5, 2023.)
KPMG: The Big Fouraccounting firm expects U.S. home prices, as measured by Case-Shiller, to fall 8% in 2023. If KPMG's latest forecast is right, the U.S. housing market in 2023 would soon experience its sharpest home price decline since 2008, a year that saw national home prices plummet 11.9%. (Forecast updated in March 2023.)
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Mortgage Bankers Association: The trade group's latest forecast has U.S. home prices, as measured by the FHFA US House Price Index, falling 0.6% in 2023 and another 1.4% dip in 2024. It then expects national home prices to rise 2.1% in 2025. (Forecast updated on April 17, 2023).
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.
The brokerage now predicts that national home prices will rise 4.5 per cent year-over-year by the end of 2023 instead of dropping one per cent in 2023, as it had predicted in December.
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.
After a record-breaking run that saw mortgage rates plunge to all-time lows and home prices soar to new highs, the U.S. housing market is finally slowing. Home sales had declined for 12 consecutive months through January 2023, and home values seem to have peaked.
Weaker economic growth and higher mortgage rates continue to slow the economy in 2023. As a result, we expect a price decline between 2022 and 2023, but the average price will not revert to pre-pandemic levels. However, we expect this decline to bottom out sometime in 2023.
While it's quite possible for median home prices to fall another 5% in 2024 – or a total potential drop of about 10% from the end of 2022 – if mortgage rates decline faster than predicted, that could mean home prices remain mostly flat through the end of 2024.
Despite concerns about high inflation, rising rates, and the possibility of a recession, public sentiment suggests that 2023 may still be an excellent time to sell. The Canadian property market could soon be experiencing a downturn, with declines in house sales and prices expected in the next 18 months.
Average house prices are expected to see a modest uptick in 2023, and should climb even higher in 2024 and 2025 as people start showing more interest in single-detached homes again.
Desjardins Forecasts a 25% Decline in Home Prices in 2023
According to a recent report by Desjardins, the Canadian housing market is expected to experience a sharp correction in 2023. Home prices are predicted to drop by 20% in Quebec and 25% in Ontario compared to their pre-pandemic levels.
In my opinion, real estate is one intelligent option to consider in 2023, as it often has excellent returns, tax advantages and provides diversification even in the face of a challenging economic climate. Real estate also has the potential to compound your investment.
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.
Stick to the 28/36 Rule. No matter how you finance your home purchase, most experts agree that people should not spend more than 28% of their gross income on housing expenses, and no more than 36% on debt. For example, if you earn $5,000 each month, your ideal mortgage payment should be no more than $1,400 per month.
A downturn in general economic activity leads to less disposable income, job losses, and fewer job openings, which decreases the demand for housing. A recession is particularly dangerous. Demand is exhausted, bringing supply and demand into equilibrium and slowing the rapid pace of home price appreciation.
According to RBC's recent economic analysis, the bottom is predicted to happen in Spring 2023. However, this does not mean that the housing correction has run its course. RBC is forecasting a peak-to-trough decline of 15% in home prices across the country, with about half of this decline still to come.
CREA predicts home sales and prices will decline in 2023, with a rebound expected in 2024. CMHC also predicts a decline in house prices and a lack of supply throughout 2023, with a recovery coming in 2024 and 2025.
Under this scenario, CMHC expects the average price will then tick up to $694,196 next year and $746,410 in 2025. Sales will amount to 423,128 this year, followed by 473,357 next year and 505,215 in 2025.
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.
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.
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.
Most real estate professionals will tell you that the best time to sell would be the spring, followed by the fall. Spring is desirable for many sellers as it is a great time to showcase your homes best features and many buyers want the transaction to be completed before the summer months.
If you close by December 31, you can deduct mortgage interest, property taxes, points on your loan and interest costs. These deductions are significant, especially in the early years of your loan when you're paying off a lot of interest.
If you are considering flipping houses in California, HomeLight always encourages you to reach out to an advisor regarding your own situation. Like many other areas in the U.S., the California housing market is seeing a decline in prices, and that decline will likely continue in 2023.
The Canadian Real Estate Association expects the average price of a home to end the year 4.8 per cent lower than 2022, but says prices will rise by roughly the same amount in 2024.
As of our June mortgage rate outlook, we predict that in the long term mortgage rates will trend towards 4%. The Bank of Canada is anticipated to cut rates by 2% over 2024 and another 1% over 2025. Adjustable rate mortgage holders will see lower payments.
RBC predicts that Ontario home prices will decrease 13.7% in 2023, and increase 2.9% in 2024. RBC also forecasts that home sales in Ontario will decrease by 13.9% in 2023 and increase by 34.1% in 2024. TD predicts that Ontario average home prices will fall by 13.3% in 2023 before rising a modest 0.8% in 2024.
Will homes continue to remain financially out of reach for many purchasers next year? Experts say hopeful buyers should not expect today's high prices to plummet anytime soon. “Home prices won't drop in 2023,” Evangelou says. “I expect pricing to be relatively flat.”
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.
An influx of immigrants has led to a rise in demand for housing. This increased demand has caused prices to skyrocket, especially in cities with limited housing options. Canada has been an attractive destination for immigrants due to its strong economy, high standard of living, and social safety net.
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.
They usually lower their prices and provide an opportunity to get a deal. As is the case with winter, there's also less inventory during the fall. Many sellers want to avoid moving during the holiday season. This gives you more room to negotiate when you do make an offer on a house.
For example, if you close on a home at the end of a month—say, March 27—you'll owe nothing the first full month (April) and your first payment will be due at the start of the second month, or May 1 in this case. This gives you only about a month after closing before your first payment is due.
San Jose, California; San Diego, California; Austin, Texas; and Phoenix, Arizona, will likely see noticeable increases before drastic decreases of more than 25%.
Will house prices go down in a recession? While the cost of financing a home typically increases when interest rates are on the rise, home prices themselves may actually decline. “Usually, during a recession or periods of higher interest rates, demand slows and values of homes come down,” says Miller.
Investor Michael Burry, who rose to fame when he predicted the collapse of the U.S. housing bubble before the 2008 financial crisis, has warned that the U.S. economy is likely to enter a recession this year.
Along those lines, organizations like Fannie Mae and the Mortgage Bankers Association forecast that the average rate on 30-year fixed-rate mortgages will decline throughout 2023, continuing into the first quarter of 2024.
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.
Is Buying A Home During A Recession Worth It? In general, buying a home during a recession will get you a better deal. The number of foreclosures or owners who have to sell to stay afloat increases, typically leading to more homes available on the market and lower home prices.
If you're an aspiring homeowner, you may be asking yourself, “I make $70,000 a year: how much house can I afford?” If you make $70K a year, you can likely afford a home between $290,000 and $360,000*. That's a monthly house payment between $2,000 and $2,500 a month, depending on your personal finances.
What Is the 28/36 Rule? The 28/36 rule refers to a common-sense approach used to calculate the amount of debt an individual or household should assume. A household should spend a maximum of 28% of its gross monthly income on total housing expenses according to this rule, and no more than 36% on total debt service.
Assuming you are financing the purchase and put at least 20% down, most lenders will require you to have a salary of at least $450,000 per year to qualify for a $2 million home loan. This could be household income if both you and your spouse are on the loan.
While a housing price correction is expected, we aren't in a housing bubble. Demand for homes remains high, and there are fewer home sellers than there were in 2022. And while the market is cooling, experts don't expect an actual housing crash or a housing bubble burst in 2023.
Weaker economic growth and higher mortgage rates continue to slow the economy in 2023. As a result, we expect a price decline between 2022 and 2023, but the average price will not revert to pre-pandemic levels. However, we expect this decline to bottom out sometime in 2023.
Toronto, Canada's largest city, has been declared the world's largest real estate bubble. The median home was $1.19 million in Q4 2022, which would require $244k/year to service that mortgage.
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.
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%.
The median home price will rise to $385,800, an increase of only 0.3% from this year's level ($384,500), while home sales will fall 6.8% compared to 2022's level (5.13 million).
"In the first half of 2023, the S&P 500 is expected to re-test the lows of 2022, but a pivot from the Federal Reserve could drive an asset recovery later in the year, pushing the S&P 500 to 4,200 by year-end," the investment bank said in a research note.
U.S. equities may disappoint in 2023, but patient investors can find potential income and returns in other markets. A grueling bear market, touched off by decades-high inflation and an aggressive Federal Reserve response, made 2022 one of the most challenging years for investment returns in the last half century.
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.
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.
Majority of the experts think consumer sentiment will see an uptick in 2023 and the Indian stock markets performance will be stellar in key areas including banking, automobiles, real estate and company stocks with strong fundamentals.
The growth profile will show divergence: the Euro area will likely face a mild recession into late 2022/early 2023, while the U.S. is expected to slide into recession in late 2023. In currency markets, further dollar strength is still expected in 2023, but of a lower magnitude and different composition than in 2022.
Introduction: My name is Chrissy Homenick, I am a tender, funny, determined, tender, glorious, fancy, enthusiastic person who loves writing and wants to share my knowledge and understanding with you.
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