The housing market outlook is turning around with house prices and rents now falling

• Realtor.com has revised its previous housing projections and now expects a decline in prices and rents.
• But the downgrade of the 2023 forecast does not indicate a significant wave of relief.
• “Home costs will continue to be higher for buyers in 2023 because the decline in house prices is very moderate and not universal.”

Realtor.com has revisited its previous housing market forecast for this year and directed it in the opposite direction.

Real estate company expect now Average home list prices are down 0.6% from a year ago, compared to a previous forecast of a 5.4% year-over-year rise in 2023.

Similarly, Realtor.com now expects a 0.9% decline in rents this year, due to the growing supply of rental properties, mirroring its previous forecast of a 6.3% rise.

To be sure, his initial predictions were very much at odds with what other analysts say would happen, and chief economist Daniel Hill seems to have acknowledged that.

“We made a bold call that home prices won’t fall in 2023, and using the latest data, we’re revising that forecast,” she said in the report.

the Preliminary forecasts for 2023, released in November, was based on a market imbalance between supply and demand, and a skepticism that homeowners would lower their asking price, given the high values ​​they are selling for real estate. This is where 2022 saw a 10.2% jump in housing prices.

However, prices have fallen this year, particularly in more expensive areas, such as the West, as buyers balk at higher prices and mortgage rates, Realtor.com said.

But the downgrade of the 2023 forecast does not indicate a significant wave of relief.

“Home costs will still be higher for buyers in 2023 because house price declines are so moderate and not universal,” Hill said. “Some areas are still seeing higher home prices and mortgage rates are still very high.”

Earlier in the year, West Coast cities saw prices drop by as much as 10%, in part because layoffs in technology dented demand. Elsewhere, however, the Midwest and Northeast saw price gains.

rental market

More apartments are coming to the market, Realtor.com said, easing the rent shortage. For example, completed multi-family construction projects expanded 24% year over year in April, according to separate data from Redfin recently.

Since homeowners are largely unwilling to refinance their mortgages, they are more inclined to rent out their properties, which increases options for renters.

Rental rates are expected to drop. [But] Whether any particular tenant will find rents lower depends on when they last moved in, Hill said. “Tenants who have stayed put and haven’t dealt with higher rents in the past few years may find their rents have some catching up to do.”

Realtor.com has lowered other projections for 2023, too:

• Instead of rising 22.8% this year, the home stock is now down 5%.
• Home sales are now expected to decline 15.8% to 4.2 million units, the lowest level since 2012, and down from an early prediction of a 14.1% decline.
• Mortgage rates are expected to fall to 6.1% by the end of the year versus the previous view of 7.1%.

While the Fed has indicated that more monetary tightening is coming, mortgage rates should ease when that cycle ends.

“This means that affordability will start to improve, but not drastically,” Hill said.