7 economics and real estate pros weigh in on their predictions for this year’s spring market.
By: Alisa Wolfson, MarketWatch, January 14, 2023
When the weather cools for winter, the housing market often does too. But is that true of the market right now — and what should we expect for the rest of the season and the year? We asked real estate experts and economists to share their predictions. (See the lowest mortgage rates you may get now here.)
Prediction 1: Home price cooling will continue until the spring selling season picks up
“Home prices continued to ease down gently through the end of the year across the US — a product of both normal seasonal cooling and still very challenging affordability conditions. The fastest cooling markets include expensive West Coast metros such as Seattle and San Diego, and Southwest metro [areas] that saw strong growth over the pandemic, including Dallas, Austin and Phoenix. We anticipate this trend to continue in January, before the typical spring selling season picks up,” says Zillow senior economist Nicole Bachaud.
Prediction 2: Seller concessions are making a comeback — and sellers are now far more willing now to lower their prices
“With affordability concerns pushing buyers out of the market, seller concessions are making a comeback,” says Kate Wood, home expert at NerdWallet. “January isn’t typically a strong month for home sales, but the beginning of the new year could be significant for homeowners weighing the decision to sell in 2023.” That said, she adds: Without a fresh crop of new listings, home prices are more likely to remain high.”
Additionally, Realtor.com chief economist Danielle Hale, notes that: “One bright spot for buyers hoping for a real estate deal is that the share of home sellers adjusting their prices lower continues to be roughly double the year ago share, up to nearly 14% in December compared to roughly 7% in the prior year. This still means that many more homes for sale will not have a lowered asking price, but buyers resolving to find a home in 2023 that fits their needs and stays within their budget may be encouraged by signs that at the end of 2022, more sellers were adjusting prices when appropriate.” (See the lowest mortgage rates you may get now here.)
Prediction 3: Buyers will have more choices and more time to make decisions
“In January, [we’re dealing] with seasonality as new listings and home sales typically dip during this time of year. This month will likely be a continuation of good news for homebuyers as the softening conditions have finally allowed them more choices and more time to make decisions. Buyers are also rewarded with flattening prices and in some places, even a small decline and sellers are still enjoying many benefits of selling at a time when there just aren’t enough homes for sale to meet demand,” says Nick Bailey, president and CEO of RE/MAX.
Prediction 4: But overall, low inventory issues still remain
“The winter months are the slowest in the housing market and that will be particularly the case this year with mortgage rates double what they were one year ago, home prices at elevated levels and concerns about the outlook for economic growth in 2023. But the inventory issue isn’t going away with supply still very limited, especially in the under $400,000 price range,” says Greg McBride, chief financial analyst at Bankrate.
Prediction 5: The housing market doesn’t appear at serious risk of total meltdown
“Even if it does cool, the housing market likely won’t crash like in 2008. Home prices won’t necessarily fall everywhere, but a combination of relatively high rates and weak homebuyer demand will likely push down prices nationwide in 2023. While a 5% and 10% drop may seem steep, declines this year are unlikely to wipe out the home price gains many houses saw over the past few years,” says Jacob Channel, senior economist at LendingTree. (See the lowest mortgage rates you may get now here.)
Prediction 6: Home price appreciation could be close to zero — and there is a ‘small chance’ mortgage rates could go lower
Lawrence Yun, chief economist and senior vice president of research at the National Association of Realtors (NAR) says home price appreciation could be close to zero. “There’s a small chance mortgage rates will go below 6% by early February. That’s based on the abnormally high spread between the 10-year Treasury borrowing rate and mortgage rate that will not persist for a long period. In this scenario, there will then be a resurgence of buyers,” says Yun.
Prediction 7: Barring an unexpected event, don’t expect much change in the next month
“Something unexpected could happen, a low probability, high impact event. Possibilities include a surprise pivot from the Fed, a sharp slowing of the economy, a stock market plunge, inflation easing faster than expected, or even a geopolitical crisis. Barring any of those, I don’t think the end of January looks much different than the beginning of January,” says McBride.