In 2023, predictions for the housing market are varied, with estimates ranging from a 22% drop to a 5.4% increase. There’s no clear agreement on the direction of house prices, but many lean towards a potential decrease.
The focus often lies on both the national median home price and local market prices. While national trends are important, local market dynamics are usually more relevant for individual homeowners and buyers. In 2022, I anticipated a rise of 8% to 10% in the median sales price across the U.S., which was a more conservative estimate compared to others who expected increases between 12% and 18%.
At the end of 2021, the median home price was $423,600, and by the third quarter of 2022, it had reached $454,900, marking a 7.4% increase. The fourth quarter data for 2022 will be available in early 2023.
In 2023, various real estate experts have offered diverse predictions for housing prices. These forecasts are subject to change with evolving market conditions, and I’ll keep track of these changes.
By May 2023, the market seems ripe for buying real estate, with prices having decreased by 5 to 10%. Concurrently, the S&P 500 has shown a 10% increase year to date. I predict that real estate prices will subsequently rise by 5 to 10% by mid-2024.
Regarding the most extreme predictions for 2023, John Burns Real Estate Consulting predicts a significant decrease of 20% to 22%, while Realtor.com forecasts a 5.4% increase. Other forecasts fall somewhere in between.
In assessing these forecasts, it’s crucial to consider both ends of the spectrum to identify potential biases or blind spots. For example, the prediction by John Burns Real Estate Consulting seems overly pessimistic, exceeding even the declines seen during the global financial crisis.
Conversely, the most optimistic forecasts may be influenced by business interests, as higher housing prices could benefit certain sectors. Given the likelihood of a recession and increasing mortgage rates in 2023, I’m skeptical of any predictions suggesting price increases.
My prediction for 2023 is an 8% decrease in median housing prices, dropping to around $419,000. This is based on various factors, including a potential global recession, high Fed rates, and the relation between risk assets and the S&P 500’s performance.
However, I don’t expect prices to fall more than 8% due to several factors, such as declining mortgage rates, the Treasury bond market’s dynamics, consumer savings, a persistent housing undersupply, a shift towards real assets, high borrower credit scores, and substantial home equity.
As of April 2023, home prices have already shown a slight decrease, but this could lead to buying opportunities in mid-2023 due to factors like a rebound in stocks and lower mortgage rates.
The major risks to this negative forecast include an influx of new housing supply and an overly aggressive Federal Reserve, which could lead to greater price declines. Conversely, the largest upside risk might be the underestimation of the liquid wealth held by potential buyers and the subsequent demand if mortgage rates decrease significantly.
Real estate remains a top choice for building wealth for many individuals.
Should my property values drop by 15% in 2023, it wouldn’t impact me much. My focus will be on my family and our primary home, and the rental income from my properties will continue to support our lifestyle.
Owning assets that offer both a steady income and practical use is ideal. But, managing tenants, upkeep, and taxes can be challenging for real estate investors.
Therefore, diversifying your investments across stocks, private real estate, bonds, and other passive income sources is a smart move.
For those looking to invest in real estate in 2023, be on the lookout for more affordable options. Patience is key.
I’m just hoping to avoid a bidding war when the right opportunity arises. Buying my dream home became a reality post-March 18, 2020, without any competition. Had there been others interested, the price might have been driven up by an additional 4%.
