Home prices are expected to keep rising next year: Here's where


Americans looking to buy a house next year can expect less competition, more homes to choose from and the highest average mortgage rates in nearly two decades. Here's what they can't expect: A widespread fall in prices that would bring relief to priced-out homebuyers.

That's the major takeaway from Realtor.com's 2023 Housing Forecast released Wednesday. Home price declines "may not happen as quickly as some have anticipated," said Realtor.com's chief economist, Danielle Hale. Prices will be elevated during the first half of 2023 and they'll probably fall or stay flat during the second half of next year, she told CBS MoneyWatch.

"We expect, for the year as a whole, 2023 is going to be higher," Hale said. "Shoppers who want to buy might have to wait a little bit."

The housing market will soon turn the page on 2022, a year that saw skyrocketing mortgage rates alongside soaring home prices. Some cities in particular - like Boise, Idaho; and Austin, Texas - saw double-digit percent increases in prices. The rising cost of homeownership deterred many aspiring buyers, who have opted instead to continue renting.

Home prices have fallen in many areas during the tail end of 2022, but mortgage rates have continued to climb. The average interest rate for a 30-year fixed mortgage was about 6.6% this week, more than double what the rate was at the start of the year.

Realtor.com expects mortgage rates to climb even further at the beginning of next year as the Federal Reserve continues to raise its benchmark interest rate. Mortgage rates could reach as high as 7.4% in the first half of 2023 before settling down to around 7.1% toward the second half of the year, the company said. When considering increases in property prices and loan rates, the typical monthly mortgage payment next year will be around $2,430, 28% higher than this year, Realtor.com predicted.

The rapid price run-up has stymied many would-be buyers. In a recent survey from LendingTree, nearly half of respondents said they were postponing major decisions, either renting for longer period of time or putting off major home renovations.

Mortgage rates have more than doubled over the last year - and could keep climbingSome real estate markets cooling as mortgage rates hit 20-year highHome values plunge in some U.S. cities as mortgage rates rise

Mortgage rates grew so fast this year that they made it difficult for buyers to figure out how much home they could afford, Hale said. In 2023, interest rates probably won't fluctuate as much, she said.

"Having more stability will make it easier for buyers when setting the right budget," she said. "And that should help encourage people to get back into the housing market."

Largest metropolitan areas

Home prices will likely increase in the nation's 100 largest metropolitan areas, Realtor.com's report said. Expect 10% hikes in Grand Rapids, Michigan; Portland, Maine; Providence, Rhode Island; Spokane, Washington and Worcester, Massachusetts.

Higher prices will likely keep away many potential homebuyers, causing rent prices to jump 6.3% and the number of homes sold to decline by 14%, Realtor.com said. However, housing inventory - the number of homes available for sale - is expected to climb nearly 23% next year, potentially giving a wider variety of dwellings to choose from to those who can afford to buy.

To be sure, all of these predictions could change depending how the Federal Reserve handles its fight against inflation next month and early next year, Hale said. The Fed has raised its benchmark rate six times this year, and, with each hike, mortgage rates have climbed as well. Hale and other economists expect the Fed to raise its rate again next month, but perhaps by not as much as previous increases.

"The housing market has borne the brunt of the Fed's attempt to control inflation," Sean Black, CEO of mortgage lender Knock, said in his company's 2023 housing prediction. "Sellers still hold the advantage in a majority of the nation's largest metros, and many will continue to favor sellers well into 2023."


More Related News

Oil Takes Breather After Three-Day Rally as Outlook Clouded
Oil Takes Breather After Three-Day Rally as Outlook Clouded

(Bloomberg) -- Oil steadied in Asia - after rallying around 7% over the previous three sessions - as investors assessed the latest commentary from Federal...

JPMorgan Cuts Hundreds More Mortgage Workers Amid Housing Woes
JPMorgan Cuts Hundreds More Mortgage Workers Amid Housing Woes

(Bloomberg) -- JPMorgan Chase & Co. cut hundreds of mortgage employees this week, adding to job losses across the industry as home-lending businesses...

Fed's Waller sees no sign of 'quick' decline in inflation

Inflation seems poised to continue slowing this year but the U.S. central bank's battle to reach its 2% target "might be a long fight" with monetary policy...

Households urged to cut energy use again as Putin rocks Europe
Households urged to cut energy use again as Putin rocks Europe

Factories and households will need to cut energy use further to help prepare for next winter, the boss of one of Europe's largest energy suppliers has warned...

Traders Are Starting to Put Big Money on the Fed Going to 6%
Traders Are Starting to Put Big Money on the Fed Going to 6%

(Bloomberg) -- A shift in sentiment on Federal Reserve policy is emerging in interest-rate options, where several big wagers on the central bank's benchmark ...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply