"The global residential real estate market has entered a new phase, as home prices have begun to decline for the first time in over a decade. The previous streak of 124 consecutive months of positive home price growth, which lasted from February 2012 until the peak of the Pandemic Housing Boom in June 2022, has been replaced by a new streak of four consecutive months of U.S. home price declines. According to the Case-Shiller National Home Price Index, U.S. home prices fell 2.4% between June and October 2022, which represents the second-largest home price correction of the post-WWII era. Despite this, it is mild in comparison to the unprecedented 26% correction that occurred between 2007 and 2012. The question that remains is how much of the historic 41%+ increase in U.S. home prices seen during the Pandemic Housing Boom – which has now slipped to 38% as of October 2022 – will be erased in the future? To gain insight into the potential trajectory of national home prices in 2023, 27 leading housing researchers were asked by Fortune for their latest housing forecasts. Of this group, 4 predict that U.S. home prices will grow in 2023, while the remaining 23 believe that U.S. home prices will continue to fall. Below are the 27 home price predictions, ordered from the most optimistic to the most pessimistic."
-Read the full article at Fortune
- The Realtor.com economics team predicts a 5.4% increase in median existing home prices in 2023, with an average mortgage rate of 7.4%. They also expect a continuation of the slowdown in home sales due to the surge in mortgage rates in 2022, resulting in slower growth in home prices and a shift in favor of buyers.
- The Home.LLC firm predicts U.S. home prices to rise 4% in 2023.
- CoreLogic predicts a 2.8% increase in U.S. home prices between November 2022 and November 2023.
- The NAR trade group projects that existing home prices are poised to rise 1.2% in 2023 while mortgage rates will average 6.3%.
- Freddie Mac's forecast model predicts a modest 0.2% decrease in U.S. home prices in 2023 with an average mortgage rate of 6.4%.
- Mortgage Bankers Association predicts a 0.6% decrease in U.S. home prices measured by the FHFA US House Price Index in 2023 and a 1.2% drop in 2024. They also forecast average mortgage rates at 5.2% in 2023 and 4.4% in 2024. They mention that increasing inventories of new homes and weak demand with builders offering price cuts and other concessions to move properties.
- Economists at Zillow forecast that U.S. home values will fall 1.1% from November 2022 to November 2023.
- Fannie Mae economists predict a 1.5% decrease in U.S. home prices measured by the Fannie Mae HPI in 2023 and 1.4% decrease in 2024. They are currently modeling an average 30-year fixed mortgage rate of 6.3% in 2023 and 5.6% in 2024.
- Redfin predicts a 4% decline in median U.S home sales price in 2023 and credits the lack of new listings as the reason for preventing prices from plummeting.
- The Amherst Group, a real estate investment firm that owns a large portfolio of single-family homes, predicts a 5% decline in U.S. home prices between September 2022 and September 2025, stating higher interests rates are being balanced by rising middle-income wage gains.
- Wells Fargo predicts a 5.5% decline in U.S home prices in 2023 and notes that previously high-performing markets in the Mountain West, driven by an influx of remote workers at the start of the pandemic, are now vulnerable to larger decline. They state that home prices in desirable locations with tighter supply are more likely to hold up better.
- Capital Economics forecast model has U.S. home prices falling 8%.
- Goldman Sachs predicts a decline in U.S home prices, ranging between 5% to 10% with their official forecast model indicating 7.6% decline, with note of risk of the decline being higher than suggested by the model.
- ING bank predicts a decline in U.S home prices between 5% to 10%, with a potential for a 20% decline, citing concern over the housing market downturn triggered by rapid increase in mortgage borrowing costs. They state that rising prices from supply limitation are now reversing with decreasing demand and increase in supply of homes leading to a risk of steep correction in prices.
- Housing analyst and author of the Calculated Risk blog, Bill McBride, predicts a 10% decrease in U.S house prices from the 2022 peak. He notes that due to the quick increase in house prices during pandemic, some stickiness in the market will not apply and sees a possibility of nominal house prices declining 10% or more and real house prices declining 25% in the next 5-7 years.
- Ruben Gonzalez, Chief Economist at Keller Williams Realty, predicts a 10% decline in median home prices tracked by NAR with the trough expected to be in first half of 2023, he also mentions that the timing may be dependent on the fluctuations in interest rates.
- TD Bank forecasts a 10% decline in U.S home prices, which includes a 5.7% drop in 2023 and another 2% drop in 2024, with improvement in home price growth expected soon after the start of 2024.
- Morgan Stanley expects a 10% decline in U.S home prices between June 2022 and 2024, but if mortgage rates fall more than expected, the decline may come in closer to 5%. They also note a potential for a 20% decline in case of a deep recession, including 8% decline in 2023 alone. They mention that despite tight inventory, home prices will start falling annually in March 2023, but supply prevents the home price drop from becoming too large.
- Moody's Analytics expect a 10% decline in U.S home prices, with a potential for 15% to 20% decline if a recession were to manifest. They attribute this decline to evaporated affordability and decrease in housing demand, with sellers quickly cutting prices to close a deal.
- Zelman & Associates previously forecasted 4% and 5% decrease in U.S home prices for 2023 and 2024 respectively. However, According to Wall Street Journal, the firm now expects U.S home prices to fall 12% from the 2022 top to 2024 bottom.
- Zonda Home forecast model foresees U.S. home prices falling 15%.
- AEI Housing Center predicts a 15% to 20% decline in U.S home prices from peak to trough, with the prices expected to bottom out in 2023 or 2024.
- CoStar expects a 20% decline in U.S home prices from peak to trough, and suggests that a 10% drop is an underestimate.
- KPMG predicts a 20% decline in U.S home prices, as measured by the Case-Shiller home price index, between Q4 2022 and Q4 2023, citing the burst of the pandemic-induced bubble caused by migration trends and the subsequent self-fulfilling momentum of prices falling nationally.
- Yieldstreet predicts a 20% decline in U.S home prices by Q3 2023 from its 2022 peak, with markets with high inventory of new homes such as Phoenix, Las Vegas, Dallas and Boise seeing more significant decline. It also suggests that markets in the Northeast, that have had less new construction, will fare better in terms of decline.
- Pantheon Macroeconomicsexpects U.S. existing home prices to fall by around 20%.
- John Burns Real Estate Consulting predicts a 20%-22% decline in U.S home prices based on the assumption of mortgage rates staying close to 6% in 2023. They attribute this decline to investors being a large part of the buyers in this cycle and now being on the sidelines and needing to sell, hence sellers not exhibiting the traditional emotional and behavioral qualities that keep home prices sticky on the downside.
All this being said, the ultra-luxury markets remain separated from reality. The real estate market in Montecito and Malibu has long been known for its high prices and limited inventory, and despite the above predictions of a slowdown, this trend remains unchanged. According to data from the Multiple Listing Service (MLS), there were 13 sales of Montecito homes and condos in the last six weeks of 2022 and 16 sales in Malibu during November 2022, which is a decline from the previous year and notably lower than the November-December numbers of 2020.
Despite this dip in sales activity, it is important to note that the luxury real estate market in these communities is not necessarily slow or in a downturn. In fact, Montecito's 13 sales in six weeks (as listed in the MLS) is not an extremely low number on average for November/December when looking back over the past 15 years. Similarly, sales in Malibu have also been relatively consistent with historical trends. Furthermore, high prices continue to be a defining feature of these markets, with even homes selling below asking price still commanding higher prices than in recent years. Overall, the ultra-luxury real estate market in Montecito and Malibu remains robust, with prices remaining high for those looking to buy.
-Read more about Montecito's 2023 market predictions at Montecito Journal
