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Six experts weigh in on real estate prospects in 2023


If “hot” is an over-used word to describe the U.S. housing market in 2021, then from tepid to freezing might best describe the overall market situation this year.

The pandemic housing boom, which saw home prices rise 40% over a two-year period, begins slow down in the second half of the year as mortgage interest duplicated compared to the beginning of the year.

As the Federal Reserve seeks to reduce decades of high inflation with rate hikes throughout the year, rising mortgage rates have contributed to widening expectations for a spread between buyers and sellers. The houses sit on market for many months when sellers continue to price homes at what buyers can can no longer afford. OLDcontract has been canceledThe asking price has decreased and the inventory level has decreased.

After breaking through 7% in October, mortgage rates have been steadily declining over the past four weeks, which may provide some relief to buyers but may not offset the still-high asking prices.

So what’s ahead for the housing market in 2023? We spoke to six experts about their predictions.

Federal Reserve and mortgage rates

Fed raises short-term base rate half a percentage point on Wednesday, one increase was smaller than the previous four, as inflation showed signs of easing.

The Fed also indicated that the economy will struggle with slower growth, higher unemployment and higher inflation in 2023.

Mike Fratantoni, chief economist for the Mortgage Bankers Association, said weaker growth often leads to lower long-term interest rates, including mortgage rates.

“The housing market has certainly welcomed the recent drop in mortgage rates,” he said. “This decline reflects market expectations that short-term interest rates are near all-time highs, as well as rising signs that the US is headed for a recession next year.”

Innovations in mortgage finance

Janneke Ratcliffe, vice president, Center for Housing Finance Policy at the Urban Institute, said housing finance has reached an inflection point.

She hopes to see innovation accelerate with lenders, starting a businessadvocates, researchers, and policy makers actively promote what is possible in mortgage finance.

“We are seeing pilots and new program around alternatives in credit scoring, artificial intelligence, climate adaptation, artificial housing, etc,” she said. “Not only does the industry see inequality, but many players are also actively voicing their commitment to closing the racial home ownership gap.”

Janneke Ratcliffe, Vice President, Center for Housing Financial Policy at the Urban Institute.

Janneke Ratcliffe, Vice President, Center for Housing Financial Policy at the Urban Institute.

Ratcliffe also expects to see increased use of adjustable-rate mortgages, accounting for 12% of all applications in November, up from 3.3% in November 2021.

“Those who are about to buy a home should not be afraid of this financial instrument,” she said. “Their use has always been widespread, and the regulatory reforms instituted after the Great Recession have significantly reduced their risks.”

The latest housing market news: Mortgage rate, home price and affordability

No ‘foreclosure tsunami’

Odeta Kushi, deputy chief economist at First American Financial Corporation, said foreclosures are the result of two simultaneous causes: a lack of solvency, which leads to past-due debt, and a lack of equity in a business. house.

With enough equity, the homeowner has the option of selling the home or tapping into that equity to overcome temporary financial hardship. The opposite—lack of equity in the home without financial hardship leading to past due debt—would again not result in foreclosure.

The owner has a very high income mineable home equity Today, Kushi said, provides a cushion against a possible price drop, but also prevents housing predicaments from turning into foreclosures.

Odeta Kushi, deputy chief economist at First American Financial Corporation.

Odeta Kushi, deputy chief economist at First American Financial Corporation.

“In fact, if struggling homeowners are asked to settle their delinquency, based on their equity buffers, an involuntary home sale is more likely to occur than foreclosure. home,” she said. “While we can expect higher foreclosures as the labor market slows and home prices fall from their peaks, the result is likely to be a trickle of foreclosures.”

Housing inventories will remain low

Property appraiser Jonathan Miller, who prepares Douglas Elliman’s monthly Real Estate report, says a lack of regular listing inventory was a major driver of price increases during the housing boom in pandemic period and it will be a major driver of prices in 2023. for New York City.

“Listing inventory piled up during previous housing downturns,” Miller said. “Consumers are so attached to low interest rates that they refinance or buy homes during boom times. Oversupply is not the story of 2023 because, even with the increase in listed inventory, modestly, price reductions should still be kept to a minimum.”

Jonathan Miller, real estate appraiser

Jonathan Miller, real estate appraiser

Redfin forecasts there will be about 4.3 million home sales in 2023, which is fewer home sales in any year since 2011 and down 16% year-over-year.

House prices fall

Taylor Marr, Redfin’s deputy chief economist, said that while there won’t be a wave of foreclosures, home prices will fall in 2023.

Mr. Marr predicts the median U.S. home sale price will fall about 4% in 2023. Even if prices drop 4% year-over-year, homes will be much more affordable in 2023 than they were before the pandemic. home buying boom, he said.

“Taking into account next year’s projected prices and mortgage rates, the typical homebuyer’s monthly payment will be about 63% higher in 2023 than it was in 2019, just before the pandemic. begin.”

Taylor Marr, deputy chief economist at Redfin

Taylor Marr, deputy chief economist at Redfin

Marr said home prices will fall the most in pandemic-hit cities while markets in the Midwest and Northeast will hold up best.

The biggest drop in price is expected in pandemic migration hotspot such as Austin, Boise and Phoenix, as well as expensive West Coast cities. Meanwhile, the housing market in major Midwest and East Coast cities that are relatively affordable, especially in the Chicago area and parts of Connecticut and upstate New York, should grow relatively well.

“Those areas tend to be more stable than expensive coastal areas and haven’t heated up as much during the pandemic’s homebuying frenzy, which means they’re not going to drop much either,” he said.

build new house

According to the National Association of Home Builders, the number of single-family homes to be started will fall by schedule in 2022, the first such decline in 11 years, despite a persistent structural deficit. housing in the United States.

The heart of a house builder, As measured by the NAHB/Wells Fargo HMI, fell for 11 straight months, signaling a continued decline in home construction activity in 2023.

“Single-family construction will eventually lead to a recovery for housing and the overall economy in 2024 as interest rates fall again,” said Robert Dietz, chief economist for the National Association. on a sustainable basis, bringing demand back into the for-sale housing market.” of house builders.

Dietz also predicts that multifamily housing construction volume will decline again in 2023, after a very strong year of growth in 2022. Multifamily housing construction, which accounts for more than 95 percent of the population, is for construction. rentals, which have surged in 2022 as mortgage rates rise and homes for sale in reduced affordability conditions.

“However, there are nearly 930,000 apartments under construction, the highest total since January 1974,” he said. “Increasing unemployment, rising apartment supply, rising vacancy rates and slowing rent growth will slow condominium construction next year.”

Build conversion?

According to Marc Norman, associate dean of the Schack Institute for Real Estate at the NYU School of Professional Studies, the transition from commercial to residential will be more talk than action.

Marc Norman, associate dean of the Schack Institute for Real Estate at the NYU School of Professional Studies.

Marc Norman, associate dean of the Schack Institute for Real Estate at the NYU School of Professional Studies.

“We’ve lived with the pandemic for nearly three years, but that hasn’t been enough time to change the ownership, finance and management systems to transform underused office spaces,” he said. properly used. “We could see the beginnings of conversion, but most buildings will be in limbo due to long-term commercial leases and continued high financing costs.”

Swapna Venugopal Ramaswamy is USA TODAY’s housing and economics correspondent. You can follow her on Twitter @SwapnaVenugopal and subscribe to our Daily Money newsletter here.

This article originally appeared on USA TODAY: Housing market forecast: Six experts weigh in on real estate in 2023

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