Story at a glance
- A new forecast from Realtor.com projects home prices will increase nationwide by 5.4 percent next year.
- The real estate company expects that mortgage rates will continue to hover around 7 percent.
- High mortgage rates alongside price growth will push up monthly payments by close to 28 percent to $2,430.
Americans have been hit hard by sky-high home prices and steadily rising mortgage rates in recent months, and a new forecast revealed that prices could keep rising in 2023.
The forecast from Realtor.com projects home prices will increase nationwide by 5.4 percent in the next year but will continue to slow overall.
“Compared to the wild ride of the past two years, 2023 will be a slower-paced housing market, which means drastic shifts like price declines may not happen as quickly as some have anticipated,” Danielle Hale, Chief Economist for Realtor.com, said in a statement.
“It will be a challenging year for both buyers and sellers, but an important one in setting the stage for home sales to return to a sustainable pace over the next two to three years,” Hale added.
The real estate company expects that mortgage rates, which have risen consistently amid a series of interest rate hikes from the Federal Reserve, to continue to hover around 7 percent over the next year.
Early in 2023, the company expects mortgage rates will average around 7.4 percent before moderating to 7.1 percent by the end of the year.
High mortgage rates alongside price growth will push up monthly payments by close to 28 percent to $2,430 and continue to keep potential buyers on the sidelines.
Because of these factors the forecast anticipates that home sales could reach their lowest level in a decade, with a projected decline of 14.1 percent to 4.53 million units.
“With mortgage rates continuing to climb as the Fed navigates the economy to a soft-ish landing, higher costs will lead to fewer closings, but that doesn’t mean homebuying will stop entirely in 2023,” Hale said.
The forecast also showed that rental growth could rise by 6.3 percent year-over-year and further strain Americans’ budgets.
A recent survey revealed that nearly two-thirds of renters who have been in their units for at least 12 months have seen their rent increase.
The median price hike for those who renewed their leases was $138 per month and $300 for those entering into new lease agreements.
The survey also found that high rents have significantly hampered the plans of renters looking to buy a home. With the typical renter able to save about $100 each month toward buying a home, slightly more than a third say they are considering purchasing a home in the next 12 months.
But Hale said those who are willing and able to navigate the housing market could still succeed in the coming year.
“Americans who are determined to make a move will find that staying up-to-date on the market, flexibility, creativity and a healthy dose of patience will go a long way toward success in the year ahead,” Hale said.
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