According to experts at real estate firm Redfin, the deep freeze in the US housing market is likely to accelerate next year and cause home prices to decline for the first time in the next decade.
The median home sale price in the U.S. is expected to fall 4 percent to $368,000 in 2023, according to Redfin’s forecast for next year. The decline marks the first annual decline in home prices since 2012.
According to Deputy Chief Economist Taylor Marr, the decline in prices will begin in the first quarter. said in a blog post. Home prices in many markets have started to decline month-over-month.
“If there isn’t a shortage of homes for sale, prices will fall more,” Marr said. “We expect new listings to continue to decline for most of next year, keeping overall inventory near historic lows and preventing prices from falling sharply.”
Home prices are expected to fall steepest in 2020 and 2021 in so-called “pandemic boomtowns” that have attracted buyers. Among the most dangerous cities are Austin, Texas; Boise, Idaho; and Phoenix, Arizona.
Meanwhile, housing markets in the Midwest and Northeast are likely to hold their prices in the coming year.
Rising mortgage rates this year have created an affordability crisis, adding to the financial pain for would-be buyers facing skyrocketing home prices and inflation.
Deteriorating conditions began to dampen buyer demand in the second half of this year, prompting desperate sellers to lower their asking prices or pull their listings altogether.
The decline in sales is expected to continue next year. Existing home sales in 2023 are expected to decrease by 16 percent year-over-year to 4.3 million.
According to Marr, the decline in sales is due to “affordability issues such as high mortgage rates, still high home prices, persistent inflation and a potential recession.”
“People only act when they have to,” Marr added.
Homeowners could see some relief in the form of cooling mortgage rates as the year progresses. Redfin forecasts that 30-year fixed mortgage rates will drop to an average of 5.8% by the end of next year after rising above 7% this year.
“The drop in mortgage rates from 6.5% to 5.8% could save a homebuyer $150 on a $400,000 monthly mortgage payment,” Marr said.
Federal Reserve Chairman Jerome Powell referred to the current conditions in the housing market as a “bubble” and this situation has increased anxiety among Americans.
A recent survey by LendingTree found that 41 percent of Americans expect the housing market to crash in the next 12 months.