The real estate market has been on a wild ride this year, with home prices reaching an all-time high in June and then beginning to decline as mortgage rates rose and drove many potential buyers out of the market. According to the National Association of Realtors, sales of existing homes dropped 1.5 percent in September from August to a seasonally adjusted annual rate of 4.71 million units, the slowest rate seen in 10 years. With all this in mind, many homeowners, sellers, and buyers are wondering what the future holds for property prices in 2023. Moody's Analytics predicts a decrease of 5% to 10% in home prices by 2023. Scott Krinsky, partner in the Residential Banking Department of Romer Debbas, a Manhattan real estate law firm, explains that if prices drop, some buyers will start to appear, particularly those who purchase with cash or with a lower loan-to-value ratio, who are less affected by any interest rate issues. Areas with strong job growth may experience a slight increase in prices, while areas where the labor market is weak may see slight price drops.
According to a new analysis by independent research firm Capital Economics, home prices could fall by 8 percent next year. This is due to rising mortgage rates and a “mild recession” which will reduce savings in buyers' pockets. Companies will continue with their cost-saving measures, which means raising sales prices and reducing the workforce. Price growth has now slowed down and some of the most overvalued ones are starting to see a correction.
Mark Zandi, chief economist at Moody's Analytics, said that if “prices are 5, 10 or 15% lower than where they are today, where they are at their peak, two years from now” it would be correct. Fitch Ratings also expects home prices to fall by the middle digits next year, although the expected drop is greater in the new housing market. Despite all this, there is no need to worry about a housing collapse because house prices will be supported by two fundamentals: supply and improved lending practices. While it is true that mortgage rates have risen and home sales and prices have slowed down in some areas due to uncertainty across the market, these factors should not be cause for alarm.
In conclusion, experts predict that house prices will fall by 10 percent next year due to skyrocketing house prices and high mortgage rates. Capital Economics also expects home prices to fall by 8 percent next year due to rising mortgage rates and a mild recession. Fitch Ratings expects home prices to fall by the middle digits next year as well. However, there is no need for panic as house prices will be reinforced by supply and improved lending practices.
