Housing Market Forecast 2023: What if it DOESN'T CRASH?
With all the talk out there about a possible housing market crash, it’s easy to get caught up in the heat of the moment.
But let me ask you, what if the housing market doesn’t crash? How might that affect your home buying or selling plans? Especially if you were baking a real estate crash into your decision-making process.
Would that take you off track or bring you back?
No, I'm not some kind of Sage with an answer for everything. I’m simply a student of life and a real estate nerd, sharing my thoughts openly with you in an ever-changing world.
For example, in a previous post, we discussed what a possible housing correction could look like in 2023.
This post will discuss what might happen if a housing crash or significant correction doesn’t happen in 2023.
I hope that considering different points of view will empower you to make well-informed real estate decisions by giving you alternate possibilities so that you can prepare for any eventuality.
Here’s the thing, whether the decision you’re making is about real estate or life in general, if you take care to prepare for contingencies, you become ready for anything, which means you’ll always be in the best position to win. I want that for you; I really do.
So, I’m not asking you to take my word for what might happen. Instead, I’m asking you to stay true to yourself by taking a step back from all the rhetorical chaos you might see or hear, including what I’m saying.
You be the judge of what makes sense to you or not. And if you don’t mind sharing, let us know in the comments what makes the most sense to you or not. Thank you.
With that, let’s talk home prices. Depending on who you ask and where you look, it seems like a loaded topic with vast speculation bouncing from one end to the other side of the human thought spectrum.
Some say home prices will tank into 2008 recession levels or worse. Others say a correction is due, yet a different group suggests another year of home price growth will continue into 2023.
Who’s right and who’s wrong, well time reveals all, so we’ll find out how it all plays out with time.
Since we’re talking about the housing market NOT crashing in this video, let’s see what some leading industry experts say.
CoreLogic, in November 2022, forecasted home prices to increase 3.9% through Sept 2023, as seen in this CoreLogic Home Price Insights report.
What’s specifically shocking about this report is after about five months of downward revisions by CoreLogic, the November report is the first upward revision.
For reference, in October 2022, CoreLogic forecasted 3.2% home appreciation through August 2023.
So that’s an increase of .7%, which might not sound like much but consider this... A seemingly simple .7% increase for a 500k house amounts to roughly an additional 3.5k dollars to buy that house.
But, of course, that’s before we factor in mortgage rates and what they might do.
Not to be a stick in the mud, but Fannie Mae predicts home price declines of 1.5% in 2023, down from its previous prediction of home price growth of 4.4% in 2023.
Clapping back is Zillow’s 2023 housing forecast suggesting home prices will increase 1.3% through 2023.
Home appreciation projections like these might seem out of touch, and maybe they are, but perhaps they aren’t.
But why not? It comes down to the available supply of homes.
So, let’s slide right into housing supply, aka housing inventory.
On a side note, does anyone else find it disturbingly stoic to call our homes supply or inventory like it’s some kind of commodity? I don’t know; maybe it’s just me. I guess it might depend on how someone defines what home means to them.
For me, home means my sanctuary that I come to on good and bad days and all days in between. When the door closes, it shuts out the world except for the friends and family I enjoy creating memories with. As such, my home helps me rejuvenate in the environment I’ve created for myself so that I can give my best to the world. I hope your home can do that for you too.
Now that you know some of what home means to me, what does home mean to you?
Danielle Hale, the chief economist for Realtor.com, found that active listings nationwide increased 33.5% over last year.
That might sound like a massive shift in the housing market, and sure, it kind of is but not for the reasons some people think.
Some people will see that 33.5% spike in active inventory and assume that means 33.5% more homeowners listed their house for sale and it’s not selling.
But that’s simply not the case. George Ratiu, the Manager of Economic Research for Realtor.com, said, “With fewer people able to afford a home, inventory is growing even while sellers are pulling back, and homes are spending longer on the market.”
Danielle backs this up when she says: “The decline in buyer demand has been spurred by rising interest rates and continuously growing home list prices that have increased the cost of financing 80% of the typical home by nearly $1,000 each month or 77.1% compared to a year ago, far outpacing recent rent growth and inflation.”
So, that active inventory statistic is presently like a false positive concerning the actual rate of new listings coming on the market. The amount of new listings coming on the market is down 13% from 2021.
That said, some enterprising individuals see a significant change in numbers and come up with clicky headlines that might sound like this.
“Homebuyers REFUSE to Buy – ACTIVE LISTINGS JUMP 33.5% as Sellers SLASH Prices!”
Oh My God – the world is on fire! The Zombie apocalypse is coming!
Wow, really!? Why can’t we shoot straight without all the hyperbolic headlines causing more and more people to become increasingly desensitized to life? Hmmm… Now, that’s an interesting concept… Maybe a zombie apocalypse is coming, just not in the way we thought. But perhaps that’s a story for another day.
For now, let’s look at why an increase in the number of homes for sale might not impact home prices as much as we might hope to have affordable housing again.
When talking about housing inventory, we should also acknowledge that a housing shortage plague persists despite the slowly increasing supply of homes.
A study commissioned in 2021 by the National Association of Realtors or NAR found that the US needs roughly 5.5 million more homes to balance supply with demand.
For now, let’s consider the other people suggesting housing inventory will explode with hundreds of thousands or millions of homes coming on the market from desperate and distressed property owners over the next 1-2 years.
To be fair, it’s easy to get all fired up if a headline sounds like:
“Foreclosures SKYROCKET 100% in the Last Year – Banks Kick People Out of Their Homes.”
Technically accurate, although according to NAR, that comes to around 2% of all homes for sale, which is statistically low and is not significant enough to cause a swing in the trajectory of the real estate market.
It’s all in the approach of how something is shared. I’m telling you this because I’m tired of seeing all the bullshit headlines confusing people and causing many to stumble.
It’s just designed to scare people to get clicks with exaggerated hyperbole and negativity. Because, unfortunately, fear, doubt, and uncertainty sell more than love, joy, and hope.
The proprietors of that content hope that people don’t catch on to the fact they are being manipulated to enrich themselves.
Look, if a person causes enough fear, doubt, and uncertainty by shouting a statement redundantly, a certain number of people will begin to believe a lie is true and be willing to pay to be lied to – it’s sad but true.
Maybe I’m just getting old or highly disillusioned, but I’m tired of seeing good people stumble, get confused, and others fall at an alarmingly increasing rate, all because of some people’s greed for money.
To me, people come before profit. So take care of people, and profit will come. Then everyone wins.
So can we all simmer down and calm our collective minds before we all go mad, please?
A good start is to stop buying into the nonsense designed to prey on your fear and focus on seeking the truth vs. a catchy headline and smooth speech.
On a side note, isn’t it interesting how many different points of view abound from one question? So what’s your point of view – will the housing supply go up, down, or stay the same? Drop us a line in the comments.
Consider this for a moment. It’ll add humanity and perspective to all of this.
Fannie Mae recently made a downward revision to their total home sales outlook for 2023 from 4.98M to 4.47M housing units.
Keep in mind this is a recent projection that accounts for the housing market turbulence, mortgage rate volatility, and the uncertain US economy.
To say it another way, that’s a minimum of 4.47 million fellow Americans selling their house.
That means a minimum of 4.47 million people are estimated to buy those places to call their new home.
Now logically, one could say multiply 4.47m by 2, and say that’s the estimated total number of people buying/ selling homes in 2023 – roughly 8.94 million people. But not so fast; that figure is not even close to the whole picture.
Consider this chart by Statista that found the average American household consists of 3.13 people. Because .13 people don’t exist, let’s round down to 3 people in each house.
So that means we would multiply 8.94m homes * 3 people per household = 26,820,000 Americans that will buy or sell a house in 2023.
So we’re talking about almost 27m people’s dreams, hopes, aspirations, lives, and life goals in the United States alone.
For reference, the current US population is roughly 336m.
So 27m people buying or selling a house is nearly 8% of the US population.
So no, treating real estate like a commodity and putting money before people is highly inappropriate and insensitive.
As you can see, real estate quickly transitions into the human factor, and when we remember we’re all humans with dreams, hopes, aspirations, and life goals – perhaps we won’t forget to treat each other with respect and kindness as we go about our day.
We’re all stronger and better together than we are not. So let’s work together to get this thing called life right, please.
Ok, so let’s discuss why so many people will move into or out of the real estate market in 2023—especially considering the current chaos.
In two words, life happens.
So let’s go over the common reasons people buy and sell homes. Then let us know in the comments if any of these reasons click with you.
The common reasons people move include: getting married, having kids, moving to a better school zone so their kids can get a better education, job relocation, retirement, divorce, death, health reasons, hardships, being closer to family, or simply because they want to.
If you’re buying or selling a house this year, share why you’re moving with us in the comments. Thank you.
Ok, let’s talk about everyone’s favorite topic… Mortgage rates. Currently, mortgage rates are hovering in the 7’s.
However, it’s no secret that the FED might continue to increase the Federal Funds rate into 2023. This might result in higher mortgage rates initially, but we might see a case for rates coming down toward the end of 2023.
It’s worth noting that even though a strong correlation seems to exist between the Federal Fund Rate Hikes and escalating mortgage rates, the respective rates do not always go hand in hand.
In fact, from a historical perspective, one can usually monitor the US 10-Year Treasury bond rate to forecast how mortgage rates are most likely to behave.
That said, if the FED wanted to, they could directly cause mortgage rates to drop as quickly as it seems they helped catapult the rates by purchasing mortgage-backed securities again. FYI, people often refer to mortgage-backed securities as MBS.
On the flip side, an argument can be made that the FED shouldn’t ever invest in MBSs.
For reference, the FED became a major investor of MBS in 2008 in the wake of the great recession to help decrease mortgage rates at the time while adding liquidity into the market. That went on for over a decade until the FED announced in May 2022 that they will stop buying MBS and begin reducing their balance sheets.
As of recording this video, the Federal Funds Rate is floating between 3.75%- 4%, as seen in this Trading Economics chart.
However, suppose the FED’s 2022 performance indicates what they might do in 2023. In that case, we might see the Federal Funds Rate peaking around 5.25% to 5.5% before hopefully moderating later in the year.
So how high might mortgage rates go? According to an expert poll conducted by mortgagereports.com, even mortgage professionals have a wide rift of mortgage rate projections ranging from 5%- 9.31% by the end of 2023.
The difference in their views seems to hinge on what FED may or may not do if a recession comes in 2023 or not.
For instance, will the FED begin reducing the Federal Funds Rate if a recession occurs?
On the other hand, what will the FED do if mortgage rates get so high that the housing sector goes code blue? In that case, will the FED buy MBS again to inject additional liquidity into the market?
Time reveals all. What do you think will happen? If you want to know my thoughts, I talked about it in my housing forecast 2023 video.
If the housing market doesn’t crash like some speculate or correct like others and myself think, what exactly might happen?
Well, then we’ll probably hear about how the real estate market is “stabilizing” as it “tapers” off the highs to find its “balance” as it “normalizes” at a faster pace of “deceleration” and a “slower rate” of home appreciation and that housing market is in “slump.”
Whew… Wow… To get all the lyrical genius from that mouthful, you might want to back it up a few times to hear it again…
Or, for fun, ask Siri to set a reminder to come back to this video in 6 months for a quick refresh on the descriptive words for the housing market we might hear in 2023. For science, of course, why not – it’ll be fun!
Some say they’ll stay where they are to ride out whatever the heck is happening in the housing market right now until they see some stability in the real estate market. Okay, that might work, and it makes sense to me.
Hold up! There is that little issue that might not work, and it could cost you more money, or even worse… It could set your life plans back for several years or longer. Almost like the people that could’ve bought a house in 2020 but didn’t because they bought into the housing market crash narrative instead; sound familiar?
Ok, I guess we should talk about that then. Let me explain.
First, there is no wrong answer here. It’s your life, so you decide what is best and right for you.
Alright, if you’re renting, check this out. According to the Federal Reserve of Dallas, rental rates are projected to increase by 5% to 7% before moderating later in 2023. So, in short, your rent is probably going to go up again…
Zumper reports that the national median rent price for a 2-bedroom property is around $1,832 currently– which is a slight improvement from the all-time high of $1,845.
To be clear, there’s nothing wrong with renting. We’ve all done it at some point. It’s just a matter of choosing what’s right for you, and only you know what’s right for you.
Look, money comes and goes. We earn it, lose it, and earn more of it again.
On the other hand, it might seem like time comes and goes too, but it doesn’t. Time is the one thing we can’t get back. Once time is spent, it’s gone forever – it’s history.
So, we must make the most of our time in each moment and do what is right for us for the reasons important to us when we have the opportunity.
What that decision looks like to you is your choice. Just make it a good one that you’re happy with.
People gossiping and speculating about the housing market is all fun and games until it’s your turn – then it just got real. Then, the need for trustworthy real estate information and education becomes essential.
The truth of real estate is this… The best time to buy or sell a home is when the time is right for you, for the important reasons in your life. Stay true to yourself, and don’t lose yourself in the chaos of life.
On that note, perhaps Benjamin Spock, a famous American pediatrician and Olympic Gold Medalist said it best this way. “Trust Yourself. You know more than you think you do.”
Look, it’s your life. Live it your way!
That said… Don’t let anyone piss on your parade. It’s your party. You can cry if you want to, or you can party like it’s 9999 and the end of time! It’s up to you. Make sure you think it through and do what’s right for you.
Ok, so you might be on the fence about buying or selling a house right now. That’s a good thing. It shows you’re thinking this through intelligently. If you'd like to chat about the best way to buy or sell a house in 2023, you can reach me here.
Thank you so much for reading this post! I'm sending you positive vibes everything goes your way! - Andrew Finney
Disclaimer: Andrew Finney, S.0173260, is a real estate salesperson with King Realty Group (KRG) in Las Vegas, NV. Andrew's videos and blog posts are his own and do not necessarily represent the views and/ or opinions of KRG.