Here's What to Expect in the Housing Market for 2023 - Industry Outlook

By Troy Van Every | January 13, 2023 | Mortgage

The case for mortgage rates to fall in 2023 – Based on newly released gross domestic product (GDP)data for the third quarter, it showed the U.S. economy grew at a rate of 2.6%, breaking the negative GDP streak over the past two quarters. Does this mean the Federal Reserve needs to hike rates even more to get the recession they’re looking for, or is there a case for mortgage rates to go below 6% over the next six months?  After the GDP report came out, the bond market rallied, sending yields lower, which some people were confused about. Traditionally, when economic data gets better, the 10-year yield sells off, and yields go up with mortgage rates. Similarly, when economic data gets weaker, the 10-year yield falls, and so do mortgage rates. However, mortgage rates and bond yields have risen over the last several months, even with back-to-back negative GDP reports.

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Here’s what to expect in the housing market this year According to John Burns Real Estate Consulting, home prices rose nearly 40% from the spring of 2020 to the spring of 2022, representing roughly a decade of price gains in just a couple of years. Housing experts and economists are not in agreement. Economists’ predictions range from prices rising by around 5% this year, according to, to as much as a 22% decline from the peak in 2022. What happens with inventory, mortgage rates, and the broader economy will likely determine which track the market takes. “Mortgage rates are really critical to the path of the housing market in the year ahead,” said Jeff Tucker, senior economist at Zillow. “We are watching to see affordability gradually improve. That should breathe some life back into the market.” Another thing he’s keeping an eye on is the inventory of homes for sale, which is already almost back up to where it was in 2020, he said.

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Millennial Homebuyers: What the 2023 Housing Market Looks Like for Gen Y and Gen Z – Based on the 2022 Profile of Home Buyers and Sellers report from the National Association of Realtors (NAR), millennials were already having a hard time becoming homeowners, but as new data shows, 2022 only added fuel to the fire. Millennials are no longer the biggest cohort of homebuyers as they were in 2020 and 2021. Instead, it’s 55- to 74-year-old buyers who take the crown, accounting for 44% of all home purchases recently. Young millennials, who are typically first-time homebuyers, made up just 14% of purchases, down from nearly a quarter in 2021. “The share of first-time homebuyers dropped to the lowest level we've ever recorded,” says Jessica Lautz, deputy chief economist and vice president of research at NAR. “What’s really striking about the first-time homebuyers is that the median age moved to 36 years old. We’re now seeing a first-time homebuyer who's now closer to 40 than they are to 30.”

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Home price increases weakened sharply in November, posting the smallest annual gain in 2 years According to CoreLogic, home prices in November were still 8.6% higher than during the same month in 2021, but it was the first year-over-year reading in single digits in 21 months. It is also the lowest rate of appreciation since November 2020. Prices are now 2.5% below the spring 2022 peak and are expected to continue to move lower this year. CoreLogic’s forecast has price movement falling into negative territory by spring before rebounding to about 2% to 3% growth in the fall. “Although home price growth has been slowing rapidly and will continue to do so in 2023, strong gains in the first half of last year suggest that total 2022 appreciation was only slightly lower than that recorded in 2021,” said Selma Hepp, deputy chief economist at CoreLogic. “However, 2023 will present its own challenges, as consumers remain wary of both the housing market and the overall economic outlook.”

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