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What’s happened to the housing market in recent years? What do experts predict for it in the remainder of 2023? How can homebuyers and sellers make the most of market conditions in the months ahead?
The United States housing market is on the road to recovery after being disrupted by the Covid-19 pandemic and the collapse of Silicon Valley Bank. Experts predict that over the remainder of 2023, home price growth will slow, inventory will remain low, and demand for homes will stay high.
Continue reading for an overview of the current housing market.
The Current Housing Market
Three years after the Covid-19 pandemic threw the housing market out of whack—and just months after the collapse of Silicon Valley Bank bank threatened to crash it—traditional seasonal housing fluctuation patterns have returned, and the United States housing market appears to be on the road to recovery.
Background
Historically, the housing market has reflected predictable home prices, sales, and listing patterns: Prices are typically at their lowest point at the start of the year, rise gradually during the summer months, and slowly decline in late autumn before the cycle starts again. By year’s end, prices are usually higher than where they started but lower than their summer peak.
The Covid-19 pandemic upended this pattern. Following lockdowns, home prices escalated quickly and, in 2020 and 2021, they hit their highest points in December rather than June or July—as they had for eight years prior. In 2022, the housing market saw a decline in demand toward the end of the year due to rising interest rates, leading to a consistent decrease in the typical sales price of homes from their peak in June. By the end of the year, the typical price was back to its January level of $315,000, with a more pronounced winter decline compared to previous years.
Housing Market Forecast
Experts say the current housing market is weak but showing signs of a gradual recovery, featuring conditions that favor sellers over buyers. They predict that in the coming months:
- Home price growth will slow but not fall substantially and will remain region-specific.
- The number of homes available for sale will remain low and won’t recover in 2023. Home construction slumped during the pandemic and hasn’t recuperated since, with inventory 46% below historical averages dating back 24 years. Worsening the shortage problem are high mortgage rates: Homeowners who secured mortgages when interest rates were lower likely won’t want to trade them in for current, higher rates, and will be less inclined to put their homes on the market.
- Demand for homes will remain high. Buyers, now more used to elevated interest rates, will keep looking for homes through the end of the year. This could lead prices to peak in the summer and decline in the fall, as traditionally happened prior to the pandemic.
- Home construction will rise but face challenges. Construction of single-family homes rose nearly 19% in April following a months-long upward trend. But builders are also dealing with labor shortages, higher materials costs, difficulties acquiring building lots, and more stringent lending standards due to continued interest rate hikes.
Experts say that these conditions continue to fuel a home affordability crisis that shows no sign of easing. Individuals making $75,000 or less a year are largely locked out of the market, as homes they’re able to afford (in the $256,000 range) comprise just 23% of existing listings.
With that said, experts are encouraged that a housing crash appears unlikely in 2023 and that we seem to have already survived a housing recession.
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