2023 Housing Market Outlook

If you look at current state of the U.S. housing market, several key trends and factors are shaping its trajectory. This housing market update will cover mortgage rates and volume, existing home sales, inventory levels, new home sales, pricing trends, delinquencies and defaults, and the overall outlook for 2023.

Mortgage Rates & Volume

Mortgage rates are expected to gradually decline back towards 5% towards the end of the year. This decline in rates is anticipated to increase demand, causing prices to rise. In the short term, higher finance costs have led many prospective buyers to become temporary renters, creating opportunities for investors to consider rental properties in today’s market.

Existing Home Sales

Existing home sales have seen some fluctuations in recent times. With affordability being a significant concern, many first-time homebuyers have been left in the dust. As the market reaches its peak, it is essential to be cautious and watch for signs of a potential downturn.

Inventory Levels

Contrary to popular belief, there is not a “shortage” of housing. The unprecedented expansion of the money stock has ignited the strong rise in home prices. It is expected that single-digit declines in home prices are probable over the next 18 months, with the value of U.S. homes having declined by an estimated $2.3 trillion in 2022.

New Home Sales

New home sales have shown signs of improvement as builders offer incentives to attract buyers. This trend has helped clear out the glut of “under construction” homes, making way for new inventory to enter the market.

Pricing Trends

Pricing trends in the housing market have been influenced by various factors, including affordability, mortgage rates, and overall demand. As mortgage rates decline, demand is expected to increase, causing prices to rise. However, it is essential to monitor these trends closely, as the market may be reaching its peak.

Delinquencies & Defaults

Delinquencies and defaults remain an area of concern in the housing market. While specific data is unavailable, it is crucial to monitor these trends and their potential impact on the market’s overall health.

Outlook for 2023

The outlook for the 2023 housing market is mixed, with several factors contributing to its trajectory. Affordability remains a significant concern, as the real mortgage price index shows just how challenging it is for many potential buyers. Investors should be looking at job growth and population growth in their target markets to make informed decisions.

As mortgage rates are expected to decline towards the end of the year, demand will likely increase, leading to rising prices. However, it is essential to keep an eye on the market’s overall health, as the peak may be near, and single-digit declines in home prices are anticipated over the next 18 months.

The 2023 housing market outlook presents both opportunities and challenges for investors and homebuyers alike. With mortgage rates expected to decline, demand may increase, but affordability remains a significant concern. Monitoring market trends and staying informed will be crucial to navigating the ever-changing landscape of the U.S. housing market.

Special thanks to my friend Rick Sharga for contributing to this report. Make sure you follow him on Twitter.

Rick Sharga
President & CEO
CJ Patrick Company
Rick.Sharga@cjpatrick.com
@ricksharga