Optimistic experts predicted the housing market would be better for buyers in 2023, but a lack of supply and record-high mortgage rates have forced would-be buyers to the sidelines.
What’s happening: More Americans than ever think it’s a bad time to buy, according to a recent Gallup survey. The percentage hasn’t been this high since Gallup started asking the question in 1978.
The good news: Home prices have moderated in most major U.S. markets.
National home prices rose 3% from August 2022 to 2023, per Redfin data.
Context: From August 2020 to 2021, when mortgage rates were significantly lower, they rose a whopping 16.1%.
Here’s where experts predict we’re headed this year.
Mortgage rate madness, continued
What they’re saying: Mortgage rates soared past 7% this summer, and “they’re unlikely to fall in a meaningful way,” Bankrate chief financial analyst Greg McBride tells Axios.
What’s next: It’s possible we dip back in the high 6s, but that won’t be enough for sellers to list, he says.
The bottom line: Mortgage rates will likely start to decline when inflation falls, experts say.
Buy vs. rent debate
What they’re saying: “In almost every single metro, it’s more affordable [to rent] than to own,” Redfin chief economist Daryl Fairweather tells Axios.
There are some outliers, including Detroit, Cleveland, Philly and Houston, she says.
What’s happening: Renters are largely at a point where they’re settled, “and rents are starting to reflect that” by stabilizing, Apartment List chief economist Igor Popov tells Axios.
What’s next: In many cities, supply has improved as apartment construction has increased, making way for (slightly) better rent deals this season.
When to buy
What they’re saying: “This is not a good time to buy a house if you have the luxury of waiting,” McBride says. Housing selection is poor and the cost to borrow is high, he says.
Yes, but: Fall is one of the best seasons for buyers each year. There’s less competition than in spring and more inventory than in winter.
In winter, there’s typically lower inventory, but you may find better deals.
Competition and supply typically heat up again heading into spring. So you’ll have more options, but more competitors.
What we’re watching: Supply. “Affordability is going to continue to deteriorate,” Fairweather predicts, noting the persistent inventory crunch.
Change in U.S. median home prices
Suburbs vs. city
The suburbs will continue to attract buyers.
What’s happening: In most major metro regions, suburban rent is more expensive than in the city, per the latest report from Apartment List.
The intrigue: As more companies call people back to the office, we could see demand grow closer to the city, experts say.
Markets to watch
What they’re saying: Fairweather has her eyes on the Sun Belt for a couple of reasons. States including Florida and Arizona are sustained by retirees — and that won’t change anytime soon.
Record heat waves may have tempered the market in cities like Phoenix and Houston. As temperatures drop this fall, the real estate market could get hotter, Fairweather says.
Meanwhile, the Midwest is creeping up rent growth charts — and could continue throughout the year, Popov says. While populations are declining in cities like Chicago, he expects individual households to multiply, pushing demand and rent prices.
People who moved in with their parents or had roommates are moving out, and data is starting to show that rising housing demand.