Skip to main content

NAR: If Rates Stay at 7%, Home Prices Won’t Fall

David Krechevsky
Nov 14, 2022
The national median existing single-family home price during the first quarter was $232,100

Chief Economist Lawrence Yun says prices could rise slightly in 2023.

The chief economist for the National Association of Realtors (NAR) believes that elevated mortgage rates and declining sales, combined with a severely limited inventory, will prevent large price drops in the housing market nationwide in 2023.

NAR Chief Economist Lawrence Yun provided his 2023 outlook on the residential real estate market on Friday during NAR NXT, The Realtor Experience, an event held in Orlando, Fla.

Lawrence Yun
Lawrence Yun

"For most parts of the country, home prices are holding steady since available inventory is extremely low," Yun said. "Some places are experiencing price gains, while some places, most notably in California, are seeing prices pull back."

He compared the current market to the one that existed during the Great Recession, and said today’s market conditions are fundamentally different.

"Housing inventory is about a quarter of what it was in 2008," Yun said. "Distressed property sales are almost non-existent, at just 2%, and nowhere near the 30% mark seen during the housing crash. Short sales are almost impossible because of the significant price appreciation of the last two years."

With mortgage rates climbing this year at an unprecedented rate — from 3% in January to around 7% in October before falling last week — the resulting downturn in the housing market has had a significant effect on the nation's overall economic performance, Yun said.

"The slide in sales and home building has [brought] down GDP," he said. "If the housing market was stabilizing and not declining, GDP would be positive."

He added that signs point to mortgage rates topping out. He cited October's consumer price index, which showed inflation rising less than economists had expected — at a 7.7% annual rate vs. the predicted 7.9%. 

Yun did express concerns, however, about the spread between mortgage rates — now hovering around 6.6% — and the benchmark federal funds rate, for which the Federal Reserve has set a target range of between 3.75% and 4%.

"The gap between the 30-year fixed mortgage rate and the government borrowing rate is much higher today than it has been historically," he said. "If we didn't have this large gap, mortgage rates wouldn't be 7%, they would be 5.8%.”

Yun said a “normal spread” would revive the economy. “If inflation disappears, then we'd see less anxiety within the financial markets and lower interest rates, which would allow owners to refinance,” he said.

In 2023, he said, he expects home sales to decline by 7%, while the national median home price will increase by 1%, with some markets experiencing price gains and others price declines.

He also projects a strong rebound for housing in 2024, with a 10% jump in home sales and a 5% increase in the national median home price.

The National Association of Realtors is America's largest trade association, representing more than 1.5 million members involved in all aspects of the residential and commercial real estate industries.

Published
Nov 14, 2022
November Jobs Report Better Than Expected

Economists say that report will make Fed's job harder.

Analysis and Data
Dec 02, 2022
Homebuying Demand Up As Rates Decline

Redfin says falling rates luring buyers back to the market.

Analysis and Data
Dec 02, 2022
Home Delistings Hit Record High In November

Redfin says pandemic boomtowns, especially on the West Coast, saw significant increases in delistings.

Analysis and Data
Dec 02, 2022
NAR: Pending Home Sales Fell For 5th Straight Month

Realtor.com expects sales in 2023 to be down overall as well.

Analysis and Data
Nov 30, 2022
What Recession? Revised 3Q GDP Rose 2.9%

The Bureau of Economic Analysis' original estimate was 2.6%.

Analysis and Data
Nov 30, 2022
Mortgage Applications Fell During Holiday Week

Third straight weekly decline in rates not enough to improve refi activity.

Analysis and Data
Nov 29, 2022