Mortgage rates could drop to 6% by year-end, but the total
count of home sales is likely to be the lowest since 2012
SANTA
CLARA, Calif., June 22,
2023 /PRNewswire/ -- Mortgage rate lock-in will
continue to be a major challenge for the housing market in the
remainder of 2023, according to the
Realtor.com® 2023 Forecast Update. While prices
have eased slightly, higher mortgage rates are hurting
affordability, and many of those who already own a home are not
incentivized to list. As a result, the total number of home sales
(projected to be down 15.8% to 4.2 million) is likely to be at its
lowest point since 2012. On the rental side, prices are expected to
drop slightly on the year (-0.9%), as strong multi-family
construction is improving inventory.
"High inflation and the Fed's actions to curb it have had a
significant impact on the housing market this year. And while
inflation has begun to ease, the sustained spike in mortgage rates
was enough to stifle the housing market after several years of low
rates and strong activity," said Realtor.com® Chief
Economist Danielle Hale. "The
housing market has really seen a double whammy in 2023, with a
retrenchment in the number of homes for sale coupled with
still-high prices and mortgage rates that have kept both first-time
and repeat buyers on the sidelines."
Revised 2023 Housing Forecast
Housing
Indicator
|
Realtor.com® 2023
Revised Forecast
|
Realtor.com® 2023
Forecast (Nov. 2022)
|
2022 Historical
Data
|
Mortgage
Rates
|
Average 6.4%
throughout the year,
6.1% by end of year
|
Average 7.4%
throughout the year,
7.1% by end of year
|
Average 5.3%, 6.7%
at end of year
|
Existing Home
Median Sales Price
Appreciation
|
- 0.6 %
|
+5.4 %
|
+10.2 %
|
Existing Home
Sales
|
- 15.8%
4.2 million
|
-14.1%
4.5 million
|
-17.8%
5.0 million
|
Existing Home For-
Sale Inventory
|
- 5 %
|
+22.8 %
|
|
Single-Family
Home Housing
Starts
|
-19.6%
0.8 million
|
-5.4%
0.9 million
|
-10.6%
1.0 million
|
Homeownership
Rate
|
65.7 %
|
65.7 %
|
65.8 %
|
Rent Change
|
-0.9 %
|
+6.3 %
|
+10.9 %
|
Affordability improving, but still a long way to
go
Home prices have been supported by persistent
underbuilding relative to household growth over the last decade,
but low affordability has had an outsized impact on demand. As a
result, Realtor.com® now expects a modest decline in
home prices of 0.6% for the year. The expectation is that mortgage
rates will also be slightly lower than originally anticipated, but
not low enough to bring down buying costs until the end of the
year. As inflation is expected to cool gradually, we expect that
mortgage rates will start to do the same beginning mid-year and
nearing 6% by the end of the year. For the year as a whole, the
cost of a mortgage is expected to be up 10.5% compared to 2022.
Mortgage rate lock-in effect impacting
inventory
Realtor.com® expects home sales to
decline 15.8% in 2023 for a total of about 4.2 million sales for
the year, the smallest annual total since 2012. Mortgage rate
lock-in has been a stronger factor than initially expected, and the
number of homes for sale has not met initial projections. As a
result, the expectation now is for inventory levels to slip 5% for
the year, and not the growth projected in the initial forecast.
"The vast majority of homeowners locked in low rates during the
pandemic and aren't particularly excited to give them up in order
to buy a new home, unless they really need to move for personal
reasons," said Hale.
Rental prices pull back
Challenging conditions in the
housing market will lead many to continue renting, driving ongoing
demand for rentals through the second half of 2023. However, the
strong uptick in new multi-family construction and people choosing
to stay in their unit in order to save money is likely to decrease
competition for new units and lead to a slight annual decline in
rental prices (-0.9%). However, despite this pull-back, rental
prices are still historically high with the average rent about
$350 more than it was
pre-pandemic.
Other economic factors to consider
Despite the Fed's
tightening, the economy and labor markets have shown resilience.
And while paychecks haven't kept pace with inflation, Americans
have dipped into pandemic savings and continued to spend money.
While this is boosting the current economy, it could have an impact
in the future if consumers burn through savings and need to rely on
high-interest debt.
About
Realtor.com®
Realtor.com® is an
open real estate marketplace built for everyone.
Realtor.com® pioneered the world of digital real
estate more than 25 years ago. Today, through its website and
mobile apps, Realtor.com® is a trusted guide for
consumers, empowering more people to find their way home by
breaking down barriers, helping them make the right connections,
and creating confidence through expert insights and guidance. For
professionals, Realtor.com® is a trusted partner
for business growth, offering consumer connections and branding
solutions that help them succeed in today's on-demand world.
Realtor.com® is operated by News Corp [Nasdaq:
NWS, NWSA] [ASX: NWS, NWSLV] subsidiary Move, Inc. For more
information, visit Realtor.com®.
Media contact: press@realtor.com
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SOURCE Realtor.com