Existing home sales in the United States will likely drop in 2023 to an 11-year low.
Sales of previously owned homes will fall for a second year in 2023 to their lowest annual total since 2012, when the housing market was still recovering from the subprime mortgage crisis of 2008–09, according to the National Association of Realtors (NAR) on Dec. 13, which believes that housing sales prices will remain high, but stable.
Previously owned home sales have been falling since the beginning of the year as Federal Reserve’s aggressive policy to hike interest rates in its battle against high inflation caused mortgage rates to surge.
The Fed slowed its pace of rate hikes to 50 basis points after its policy meeting ended on Dec. 14, after four consecutive months of 75 basis-point increases, a day after U.S. consumer inflation readings fell for a second month in November.
Housing Sales Expected to Decline in 2023
Sales through October 2022 were just short of 4.4 million, according to Lawrence Yun, NAR chief economist and senior vice president of research.
Housing sales are projected to tumble 6.8 percent, to 4.78 million next year, according to the NAR.
This would be a massive drop from the 5.13 million projections for 2022, which includes expected housing sales numbers for November and December.
U.S. home sales reached its peak in the wake of the pandemic, with more than 6.12 million purchases in 2021, for the highest sales total since 2006, right before the financial crisis of 2008–09.
“The demand for housing continues to outpace supply,” reported Yun.
Housing-supply constraints have had a major affect on prices, but lately they have remained more or less flat.
“Half of the country may experience small price gains, while the other half may see slight price declines,” said Yun.
Atlanta, Georgia; Raleigh, North Carolina; Dallas, Texas; Fayetteville, Arkansas; and Greenville, South Carolina, now join five other metropolitan areas as part of NAR’s top 10 housing markets for 2023.
“However, markets in California may be the exception, with San Francisco, for example, likely to register price drops of 10–15 percent,” he continued.
Average Housing Prices Are Predicted to Grow Only Slightly Next Year
Yun predicts that the median home price will rise, from $384,500 to $385,800, in 2023, for a 0.3 percent increase, following a 9.6 percent gain in 2022.
“Since we expect only a small decline in prices next year, mortgage rates will dictate housing affordability, and, as a result, demand and sales in 2023,” said Taylor Marr, deputy chief economist at Redfin on Dec. 6.
There were 1.22 million existing units for sale, according to the NAR in October, well below the monthly average of 2.3 million homes, and down 0.8 percent from September, for the lowest figures since 1982.
He also expects that rental price increases will ease next year to a rate of 5 percent, down from 7 percent in 2022.
Yun predicted that mortgage rates, which hit above 7 percent for the popular 30-year fixed-rate loans in October, should settle at 5.7 percent as the Fed slows down the pace of its rate hike policy.
The 30-year rate stood at 6.41 percent in early December, according to the Mortgage Bankers Association.
Yun also noted that the rate is lower than the pre-pandemic historical rate of 8 percent.
He said that foreclosure rates, which comprise less than 1 percent of all mortgages, will likely remain at historically low levels through 2023.
Yun further predicted that U.S. GDP will grow by 1.3 percent, roughly half the typical historical pace of 2.5 percent.
Reuters contributed to this report.