NAR Predicts Nearly 7% Decline in Home Sales, Stable Prices in 2023
John Jordan | December 14, 2022
WASHINGTON—What was evident from the forecasts from noted real estate economists, including National Association of Realtors Chief Economist Lawrence Yun, at yesterday’s Real Estate Forecast Summit is that while 2023 will be a difficult year for many, it will in no way mirror the severe downturn the industry suffered in 2008.
Yun, forecasts that 4.78 million existing homes will be sold, prices will remain stable, and Atlanta will be the top real estate market to watch in 2023 and beyond. Yun unveiled the association’s forecast on Tuesday during NAR’s fourth annual year-end virtual Real Estate Forecast Summit.
He also offered some good news for real estate professionals and prospective homebuyers as he believes mortgage rates have hit their peak after eclipsing 7% in late 2022. Yun expects the 30-year fixed mortgage rate to settle at 5.7% as the Fed slows the pace of rate hikes to control inflation. He also noted the 2023 rate is lower than the pre-pandemic historical rate of 8%.
Yun’s prediction for mortgage rates in 2023 is significantly lower than some other economists. For example, Danielle Hale, Chief Economist for Realtor.com, predicts the average mortgage interest rate for 2023 will be 7.4% and will end the year at 7.1%.
Yun predicts home sales will decline by 6.8% compared to 2022 (5.13 million) and the median home price will reach $385,800 – an increase of just 0.3% from this year ($384,500).
“Half of the country may experience small price gains, while the other half may see slight price declines,” Yun said. “However, markets in California may be the exception, with San Francisco, for example, likely to register price drops of 10–15%.”
Yun expects rent prices to rise 5% in 2023, following a 7% increase in 2022. He predicts foreclosure rates will remain at historically low levels in 2023, comprising less than 1% of all mortgages.
Yun forecasts U.S. GDP will grow by 1.3%, roughly half the typical historical pace of 2.5%.
At the summit, NAR also released its Top 10 Real Estate Markets to Watch in 2023 and into the Future.” They were:
Atlanta-Sandy Springs-Marietta, GA
Dallas-Fort Worth-Arlington, TX
Fayetteville-Springdale-Rogers, AR, MI
Charleston-North Charleston, SC
San Antonio-New Braunfels-TX
“The demand for housing continues to outpace supply,” Yun said. “The economic conditions in place in the top 10 U.S. markets, all of which are located in the South, provide the support for home prices to climb by at least 5% in 2023.”
NAR selected the top 10 real estate markets to watch in 2023 based on how they compared to the national average on the following economic indicators: 1) better housing affordability; 2) greater numbers of renters who can afford to buy a median-priced home; 3) stronger job growth; 4) faster growth of information industry jobs; 5) higher shares of the information industry in the respective local GDPs; 6) migration gains; 7) shares of workers teleworking; 8) faster population growth; 9) faster growth of active housing inventory; and 10) smaller housing shortages.