Science

Home prices expected to rise next year: Here’s where

Americans looking to buy a home 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 massive drop in prices that will bring relief to low-cost homebuyers.

That’s the key finding from Realtor.com’s 2023 Housing Forecast, released Wednesday. Realtor.com’s chief economist, Danielle Hale, said the home price collapse “may not be as quick as some have projected.” He told CBS MoneyWatch that prices will rise during the first half of 2023 and that they will probably fall or remain stable during the second half of next year.

“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.”

The housing market will soon be turning the page on 2022, a year that saw mortgage rates rise as home prices rose. Certain cities in particular – such as Boise, Idaho; and Austin, Texas – saw double-digit percentage increases in prices. The rising cost of home ownership has discouraged many aspiring buyers, who have instead opted to continue renting.

Home prices have fallen in many areas through the 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.


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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. When considering increases in property prices and loan rates, the typical monthly mortgage payment next year will be about $2,430, up 28% from this year, Realtor.com predicted.

The rapid increase in prices has made many prospective buyers nervous. 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.

Hale said mortgage rates rose so sharply this year that they made it 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.”


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largest metropolitan area

Realtor.com reports that home prices are most likely to increase in the country’s 100 largest metropolitan areas. 10% hike expected in Grand Rapids, Michigan; Portland, Maine; Providence, Rhode Island; Spokane, Washington and Worcester, Massachusetts.

Realtor.com said the high prices would keep many potential homebuyers away, leading to a 6.3% increase in rent prices and a 14% drop in the number of homes sold. However, housing inventory – the number of homes available for sale – is expected to climb about 23% next year, potentially giving a wider variety to choose from for those who can afford to buy.

All of these predictions are subject to change depending on how the Federal Reserve handles its fight against inflation in the coming months and early next year, for sure. Fed has raised its benchmark rate Mortgage rates have gone up six times this year, and with each increase, too. Hale and other economists expect the Fed to raise rates again next month, but probably not as much as previously thought.

“The housing market has borne the brunt of the Fed’s effort to control inflation,” Sean Black, CEO of mortgage lender Nock, said in his company’s 2023 housing forecast. “Sellers still hold an advantage in the country’s largest metros, and many will continue to favor sellers in 2023.”

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