The National Association of Realtors’ (NAR) 2023 forecast is in and Lawrence Yun, the organization's chief economist and senior vice president of research, says prices will remain stable, Atlanta will be the hottest housing market to watch, and 4.78 million existing homes will be sold.
Yun unveiled the association's forecast Tuesday during NAR's fourth annual year-end Real Estate Forecast Summit.
According to Yun, the industry should expect homebuying to slow even more in the upcoming year, but still expect a slight uptick in home prices. He predicts that home sales will decline by 6.8% (5.13 million) compared to 2022 and that the median home price will reach $385,800 — an increase of just 0.3% ($384,500) from this year.
That’s the national forecast; home price growth will vary depending on the region, he said.
"Half of the country may experience small price gains, while the other half may see slight price declines," Yun said. "However, markets in California may be the exception, with San Francisco, for example, likely to register price drops of 10% to 15%."
Real estate and mortgage professionals should feel some relief that the initial shock of falling home sales is nearly over. By the end of 2022, Yun says, sales will be down 16% compared to last year. Of course, last year had abnormally high figures because people were still enjoying exceptionally low mortgage rates. Next year's expected 6.8% fall in home sales would obviously be much smaller by comparison.
Rent prices should see an even sharper increase in 2023 with an expectation to rise 5%, according to Yun, following a 7% increase in 2022. Yun, though, believes foreclosure rates will remain at historically low levels in 2023, comprising less than 1% of all mortgages.
U.S. GDP is predicted to grow by 1.3%, roughly half the typical historical pace of 2.5%. After eclipsing 7% in late 2022, Yun expects the 30-year fixed mortgage rate to settle at 5.7% as The Federal Reserve slows the pace of rate hikes to control inflation. This is lower than the pre-pandemic historical rate of 8%, he noted.
Will The Market Crash In 2023?
Yun said the figures for this year are similar to what we saw in 2013 and 2014 as we emerged from the 2008 recession. However, in 2008 there were 8 million job losses in a single year. This year’s job market continues to hold strong.
Because of differing factors and the regulations set in place after the 2008 housing market crash, Yun believes there is little chance that the nation will face a housing market collapse in 2023. Still, he said, “I would not be surprised if we have two additional months of a decline before setting the condition for improvement next year."
Hottest Markets To Watch In 2023 And Beyond
NAR also listed the Top 10 real estate markets to watch in 2023 and into the future. The metros are ranked in order below.
- Atlanta-Sandy Springs-Marietta, Georgia
- Raleigh, North Carolina
- Dallas-Fort Worth-Arlington, Texas
- Fayetteville-Springdale-Rogers, Arkansas-Missouri
- Greenville-Anderson-Mauldin, South Carolina
- Charleston-North Charleston, South Carolina
- Huntsville, Alabama
- Jacksonville, Florida
- San Antonio-New Braunfels, Texas
- Knoxville, Tennessee
NAR’s predictions are based on the following indicators: better housing affordability; greater numbers of renters who can afford to buy a median-priced home; stronger job growth; faster growth of information industry jobs; higher shares of the information industry in the respective local GDPs; migration gains; shares of workers teleworking; faster population growth; faster growth of active housing inventory; and smaller housing shortages.
“The demand for housing continues to outpace supply," Yun said. "The economic conditions in place in the top 10 U.S. markets, all of which are located in the South, provide the support for home prices to climb by at least 5% in 2023."
