Real Estate Predictions: 5 Predictions for 2023

5 Predictions for 2023 by Matthew Gardner, Chief Economist at Windermere

There is no housing bubble.

“​​Over the past couple of years, home prices got ahead of themselves due to a perfect storm of massive pandemic-induced demand and historically low mortgage rates. While I expect year-over-year price declines in 2023, I don’t believe there will be a systemic drop in home values. Furthermore, as financing costs start to pull back in 2023, I expect that will allow prices to resume their long-term average pace of growth.”

Mortgage rates will drop.

“I expect the Fed to start pulling back from their aggressive policy stance, and this will allow rates to begin slowly stabilizing. Rates will remain above 6% until the fall of 2023 when they should dip into the high 5% range. While this is higher than we have become used to, it’s still more than 2% lower than the historic average.”

Don't expect inventory to grow significantly.

“In 2023 I don’t expect a significant increase in the number of homes for sale, as many homeowners do not want to lose their low mortgage rate. In fact, I estimate that 25-30 million homeowners have mortgage rates around 3% or lower. Of course, homes will be listed for sale for the usual reasons of career changes, death, and divorce, but the 2023 market will not have the normal turnover in housing that we have seen in recent years.”

No buyers market but a more balanced one.

“A buyer’s market is usually defined as having more than six months of available inventory, and the last time we reached that level was in 2012 when we were recovering from the housing bubble. While a buyer’s market in 2023 is unlikely, I do expect a return to a far more balanced one.”

Sellers will have to become more realistic.

“We all know that home sellers have had the upper hand for several years, but those days are behind us. I expect listing prices to pull back further in the coming year, which will make accurate pricing more important than ever when selling a home.”

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