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- Realtor.com has revised its previous real estate forecasts and now expects prices and rents to fall.
- However, a downgrade in the 2023 outlook doesn’t mean a huge wave of relief.
- “In 2023, the cost of a home for buyers will still be higher as the declines in home prices are very small and not widespread.”
Realtor.com reviewed its previous forecasts for the housing market for this year and took them in the opposite direction.
The real estate company now expects average listing prices for homes to fall 0.6% year-on-year, compared to its previous forecast of a 5.4% year-on-year increase in 2023.
Similarly, Realtor.com now forecasts rents to fall 0.9% this year amid a growing supply of rental properties, reversing its previous forecast of a 6.3% increase.
Certainly, the initial guidance largely contradicted what other analysts had predicted, and Chief Economist Danielle Hale appeared to acknowledge this.
“We have boldly asserted that house prices will not fall in 2023 and with the latest data we are revising that forecast,” she said in the report.
The original forecast for 2023, released in November, was based on the demand-supply imbalance in the market and skepticism that homeowners would lower their asking price given the homes’ high selling prices. This means that in 2022 house prices increased by 10.2%.
However, prices have fallen this year, particularly in the priciest regions like the West, as buyers balked at high prices and mortgage rates, Realtor.com said.
However, a downgrade in the 2023 outlook doesn’t mean a huge wave of relief.
“In 2023, the cost of a home for buyers will still be higher as the declines in home prices are very mild and not widespread,” Hale said. “In some areas, property prices are still rising and mortgage rates are still very high.”
Earlier in the year, West Coast cities saw prices fall as much as 10%, in part as tech layoffs reduced demand. But elsewhere, in the Midwest and Northeast, there have been price increases.
rental market
According to Realtor.com, more apartments are coming to the market, which is alleviating the rent shortage. For example, completed multi-family housing projects in April rose 24% year over year, according to separate data from Redfin.
And since homeowners are largely unwilling to refinance their mortgages, they’re more inclined to rent out their properties, expanding renter options.
“A drop in asking rents is to be expected. [But] “Whether a given tenant will find lower rents depends on when they last moved,” Hale said. “Renters who have stayed there and haven’t struggled with the higher rents of recent years may find that their rent has some catching up to do.”
Realtor.com also downgraded other forecasts for 2023:
- Instead of a 22.8% increase in the housing stock this year, it has now fallen by 5%.
- Home sales are now expected to fall 15.8% to 4.2 million units, the lowest since 2012 and less than an initial 14.1% drop.
- And mortgage rates are likely to fall to 6.1% by the end of the year, versus 7.1% previously expected.
While the Federal Reserve has hinted at further monetary tightening, mortgage rates are likely to fall once this cycle is complete.
“That means affordability will improve, but not drastically,” Hale said.
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