Home prices are expected to continue to rise next year: Here

Americans looking to buy a home next year can expect less competition, more homes to choose from and the highest average mortgage rates in nearly two decades. What they can’t expect is this: a massive drop in prices will bring relief to pricey homebuyers.

That’s the main takeaway from Realtor.com’s 2023 Housing Forecast released Wednesday. Realtor.com chief economist Danielle Hale said home price declines “may not happen as quickly as some expect.” He told CBS MoneyWatch that prices will rise in the first half of 2023 and likely decline or remain flat in the second half of next year.

“For the year as a whole, we expect 2023 to be higher,” Hale said. “Buyers who want to buy may have to wait a little longer.”

The housing market will soon turn the page in 2022, a year in which mortgage rates have risen rapidly along with rising home prices. Some cities in particular—like Boise, Idaho; and Austin, Texas — saw double-digit percentage increases in prices. The rising cost of home ownership has deterred many would-be buyers from continuing to rent.

At the end of 2022, home prices fell in many areas, but mortgage rates continued to rise. The average interest rate for a 30-year fixed mortgage was about 6.6% this week, more than double the rate at the beginning of the year.

High mortgage rates depress home sales


Realtor.com expects mortgage rates to rise further early next year as the Federal Reserve continues to raise the key interest rate. Mortgage rates could reach 7.4% in the first half of 2023 and fall to around 7.1% towards the second half of the year. Realtor.com predicts that the typical monthly mortgage payment next year will be about $2,430, up 28% from this year, when property prices and interest rates rise.

The rapid increase in prices deterred many potential buyers. In a recent LendingTree survey, nearly half of respondents said they’ve put off major decisions by either renting longer or putting off major renovations.

Mortgage rates have risen so fast this year that they’ve made it difficult for buyers to figure out how much home they can afford, Hale said. Interest rates probably won’t change much in 2023, he said.

“Having more stability will make it easier for buyers to set the right budget,” he said. “And that should encourage people to get back into the housing market.”

The average for a 30-year fixed-rate mortgage is at its highest level since 2001


The largest metropolitan areas

Home prices are likely to increase in the nation’s 100 largest metropolitan areas, according to a Realtor.com report. Expect a 10% increase in Grand Rapids, Michigan; Portland, Maine; Providence, Rhode Island; Spokane, Washington and Worcester, Massachusetts.

Higher prices are likely to drive away many potential home buyers, leading to a 6.3% increase in rents and a 14% drop in the number of homes sold, according to Realtor.com. However, housing inventory – the number of homes for sale – is expected to increase by about 23% next year, potentially giving those who can afford to buy a wider variety of homes to choose from.

To be sure, all of those projections are subject to change depending on how the Federal Reserve handles inflation next month and early next year, Hale said. There is a Fed increased the benchmark rate it has increased sixfold this year, and with each increase, mortgage rates have also risen. Hale and other economists expect the Fed to raise interest rates again next month, but perhaps not by as much as previous hikes.

“The housing market has borne the brunt of the Fed’s attempt to control inflation,” Sean Black, CEO of mortgage lender Knock, said in the company’s 2023 housing forecast. “Sellers still dominate most of the nation’s largest metros, and many will continue to favor sellers through 2023.”

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