If you keep a close eye on the housing market, you may have heard predictions that home prices will fall by the end of the year. However, recent data shows a completely different story. In this blog post, we’ll dive deeper into the 2023 home price forecasts from seven prominent organizations to give you a better understanding of what’s really going on.
As you can see from the visual provided, all seven organizations originally predicted that home prices would fall in 2023. As the red in the middle column shows, in all instances, their original forecast called for home prices to fall. However, their revised forecasts show a very different story. Every expert has updated their projections to show that they expect prices to either remain flat or have positive growth. This is a significant change from their original forecasts, and it’s important to take note of.
It’s important to understand that there’s seasonality to home price appreciation. As the end of the year approaches, activity in the housing market typically slows down, which means that home price growth will slow down too. However, this doesn’t mean that prices are falling. It simply means that they’re not increasing as quickly as they were during the peak home buying season.
It’s also worth noting that there are several reasons why home prices are so resilient to falling. According to Odeta Kushi, Deputy Chief Economist at First American, there is a significant shortage of homes for sale right now, which is driving prices up. Additionally, mortgage rates are still relatively low, which makes it easier for homebuyers to afford higher-priced homes.
“One thing is for sure, having long-term, fixed-rate debt in the U.S. protects homeowners from payment shock, acts as an inflation hedge – your primary household expense doesn’t change when inflation rises – and is a reason why home prices in the U.S. are downside sticky.”
Another factor to consider is the strong demand for homes from millennials. This demographic cohort is entering peak home buying age, which means that demand for homes is likely to remain strong for the foreseeable future. As supply continues to lag behind demand, home prices will likely continue to appreciate, albeit at a slower rate.
Finally, it’s worth noting that the COVID-19 pandemic has had a significant impact on the housing market. While the initial impact was negative, with many people putting their home buying plans on hold, the market has since bounced back. With many people still working from home and looking for more space, demand for larger homes has increased. This has resulted in a strong sellers’ market, with prices continuing to appreciate.
In conclusion, while there may be some seasonality to home price appreciation, it’s important to keep a long-term perspective on the housing market. With a shortage of homes for sale, low mortgage rates, and strong demand from millennials, it’s likely that home prices will continue to appreciate in the coming years, albeit at a slower rate. So, if you’re thinking about buying a home, there’s no need to wait for prices to fall – they may not do so anytime soon.
