While elevated mortgage rates, sluggish home sales and high inflation have taken a significant toll on the housing industry as a whole, it’s unlikely that these issues will cause home prices to drop next year, at least according to National Association of Realtors (NAR) Chief Economist Lawrence Yun.
In fact, we may see a further uptick in US home prices in 2023, even if mortgage rates stay at or near 7%, Yun said.
Yun, who analyzed the current state of the overall US residential market, offered his 2023 market outlook last week at the NAR conference in Orlando.
“For most parts of the country, home prices are holding steady since available inventory is extremely low,” Yun said. “Some places are experiencing price gains, while some places, most notably in California, are seeing prices pull back.”
While the unprecedented uptick in mortgage rates led to a lack of demand from buyers, it has also acted as a deterrent for homeowners, who are hesitant to list their homes for sale in a tough market. In turn, purchase inventory levels have stayed low in most markets including the Charleston metro area.
The housing market conditions are also fundamentally different than they were during the Great Recession of 2008, according to Yun. As such, it’s unlikely that there will be a significant increase in distressed property inventory on the market — or a subsequent decline in housing prices — in the near future.
“Housing inventory is about a quarter of what it was in 2008,” Yun said. “Distressed property sales are almost non-existent, at just 2%, and nowhere near the 30% mark seen during the housing crash. Short sales are almost impossible because of the significant price appreciation of the last two years.”
Plus, there are signs that mortgage rates have topped out at 7%, Yun noted. One such example is the October consumer price index, which showed that inflation is rising less than expected.
But while Yun expects to see an increase of 1% in the national median home price next year, we’re seeing much higher gains here in Charleston. According to the Charleston Trident Association of Realtors (CTAR), through October of this year (compared with the same dates last year) Charleston county has seen an 11.1% decrease in new listings which can account for the 15.0% increase in median sales price.
Some other forecasts expect national home sales to fall in 2023, including Goldman Sachs, whose economists expect home prices to fall by 5% to 10% next year.
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