Science

Domestic sales may decline in 2023. The biggest decline can be seen in these cities.

Home sellers should brace themselves for a tough year, with a real estate group predicting that property sales could decline in 2023 as rising mortgage rates and home prices put more buyers out of reach. has been bypassed.

According to Realtor.com’s 2023 Housing Forecast, the number of homes sold will drop 14.1% to 4.53 million, representing the lowest number of property transactions since 2012, when the US was still recovering from the housing crash and Great Recession .

The pandemic caused a surge in real estate sales, fueled by a combination of record-low mortgage rates and work-from-home orders from many employers. Since the start of 2020, home prices have increased by nearly 40%, while mortgage rates have more than doubled since the start of the year, a double whammy that has forced many buyers out of the market.

Sellers could feel the brunt of that impact next year, according to a new Realtor.com forecast.

“Higher home prices and mortgage rates [will] limit the pool of eligible home buyers” in 2023, it said.

Home sales are expected to decline the most in California and Florida. Realtor.com predicts that the biggest drop in sales volume will be in these cities:

  • Ventura, California: -29.1% decline
  • San Jose, California: -28.8%
  • Bradenton, Florida: -28.7%
  • San Diego, California: -27.3%
  • Palm Bay, Florida: -18.3%
  • Los Angeles, California: -15.8%
  • Tampa, Florida: -15.6%
  • Tucson, Arizona: -14.7%
  • Fresno, California: -13.7%
  • San Francisco: -13.3%

Potential bright side for sellers

If there’s a bright side for sellers, according to Realtor.com’s 2023 housing forecast, it’s that the median sale price in the nation’s top 100 markets is expected to rise an average of 5.4% next year.

Not everyone’s outlook on home prices in 2023 is as good. Some economist are forecast Rising mortgage rates and economic uncertainty could cause real estate values ​​to drop by up to 20% over the next year.

Even though Realtor.com is predicting higher home prices next year, the pace of increase represents a slower rate than the blistering growth of the past two years. Prices will rise during the first half of 2023, but are likely to fall or remain stable during the second half of next year, Danielle Hale, chief economist at Realtor.com, told CBS MoneyWatch.

“We expect, for the full year, 2023 is going to be higher,” Hale said. “Buyers who want to buy may have to wait a little longer.”

Realtor.com predicts that higher prices in some cities will be more dramatic than others. Metro areas that could see the fastest growth are:

  • Worcester, Massachusetts: 10.6%
  • Portland, Maine: 10.3%
  • Grand Rapids, Michigan: 10%
  • Providence, Rhode Island: 9.8%
  • Spokane, Washington: 9.6%
  • Springfield, Massachusetts: 8.9%
  • Boise, Idaho: 8.7%
  • Chattanooga, Tennessee: 8.2%
  • Indianapolis, Indiana: 7.8%
  • Milwaukee, Wisconsin: 7.7%

Those higher prices could be discouraging for buyers who have already faced sharply higher real estate valuations in 2022. Certain cities in particular – such as Boise, Idaho; and Austin, Texas — saw double-digit percentage increases this year.

The rising cost of home ownership has discouraged many aspiring buyers, who have instead opted to continue renting. In a recent LendingTree survey, nearly half of respondents said they were postponing major decisions, either renting for the long term or making major home renovations.

Home prices have fallen in some areas through the back end of 2022, but mortgage rates continue to rise. The average interest rate for a 30-year fixed mortgage this week was about 6.6%, more than double what it was at the start of the year.

Realtor.com expects mortgage rates to climb even further early next year as the Federal Reserve continues to raise its benchmark interest rate. The company said mortgage rates could reach 7.4% in the first half of 2023, falling to around 7.1% in the second half of the year.

The combination of higher home prices and mortgage rates in 2023 could push the typical monthly mortgage payment to $2,430 in 2023, or 28% higher than this year, Realtor.com predicted.


Higher mortgage rates drive down home sales

02:09

Hale said mortgage rates rose so quickly this year that it was difficult for buyers to figure out how much home they could afford. In 2023, interest rates probably won’t fluctuate as much, he said.

“Having more consistency will make it easier for buyers to set the right budget,” she said. “And that will help encourage people to come back to the housing market.”

With buyers sitting on the sidelines, the number of homes available for sale is expected to climb nearly 23% next year. A greater variety of options bode well for buyers, while sellers will face more competition.

Hale said all of these predictions could change depending on how the Fed handles its fight against inflation over the course of next month and early next year. Fed has raised its benchmark rate Mortgage rates have gone up six times this year, and with each increase. Hale and other economists expect the Fed to raise rates again next month, but probably not as much as previously thought.

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