![Home Price Forecasts Revised for 2023 [INFOGRAPHIC]](https://lifeinnewton.com/wp-content/uploads/2023/09/Home-Price-Forecasts-Revised-for-2023-NM-380x675.jpg)
Toward the end of last year, there were a number of headlines saying home prices were going to fall substantially in 2023. That led to a lot of fear and questions about whether there was going to be a repeat of the housing crash that happened back in 2008. But the headlines got it wrong.
While there was a slight home price correction after the sky-high price appreciation during the ‘unicorn’ years, nationally, home prices didn’t come crashing down. If anything, prices were a lot more resilient than many people expected.
Let’s take a look at some of the expert forecasts from late last year stacked against their most recent forecasts to show that even the experts recognize they were overly pessimistic.
This visual shows the 2023 home price forecasts from seven organizations. It provides the original 2023 forecasts (released in late 2022) for what would happen to home prices by the end of this year and their most recently revised 2023 forecasts (see chart below):
As the red in the middle column shows, in all instances, their original forecast called for home prices to fall. But, if you look at the right column, you’ll see all experts have updated their projections for the year-end to show they expect prices to either be flat or have positive growth. That’s a significant change from the original negative numbers.
There are a number of reasons why home prices are so resilient to falling. As Odeta Kushi, Deputy Chief Economist at First American, says:
“One thing is for sure, having long-term, fixed-rate debt in the U.S. protects homeowners from payment shock, acts as an inflation hedge – your primary household expense doesn’t change when inflation rises – and is a reason why home prices in the U.S. are downside sticky.”
For home prices, you’re going to continue to see misleading media coverage in the months ahead. That’s because there’s seasonality to home price appreciation and they’re going to misunderstand that. Here’s what you need to know to get ahead of the next round of negative headlines.
As activity in the housing market slows at the end of this year (as it typically does each year), home price growth will slow too. But, this doesn’t mean prices are falling – it’s just that they’re not increasing as quickly as they were when the market was in the peak homebuying season.
Basically, deceleration of appreciation is not the same thing as home prices depreciating.
The headlines have an impact, even if they’re not true. While the media said home prices would fall significantly in their coverage at the end of last year, that didn’t happen. Connect with a real estate agent so you have a trusted resource to help you separate fact from fiction with reliable data.
The National Association of Realtors (NAR) is set to release its most recent Existing Home Sales (EHS) report tomorrow. This monthly release provides information on the volume of sales and price trends for homes that have previously been owned. In the upcoming release, it’ll likely say home prices are down. This may seem a bit confusing, especially if you’ve been following along and reading the blogs saying home prices have hit the bottom and have since rebounded.
So, why would this say home prices are falling when so many other price reports say they’re going back up? It all depends on the methodology of each one. NAR reports on the median home sales price, while some other sources use repeat sales prices. Here’s how those approaches differ.
The Center for Real Estate Studies at Wichita State University explains median sales prices like this:
“The median sale price measures the ‘middle’ price of homes that sold, meaning that half of the homes sold for a higher price and half sold for less . . . For example, if more lower-priced homes have sold recently, the median sale price would decline (because the “middle” home is now a lower-priced home), even if the value of each individual home is rising.”
Investopedia helps define what a repeat sales approach means:
“Repeat-sales methods calculate changes in home prices based on sales of the same property, thereby avoiding the problem of trying to account for price differences in homes with varying characteristics.”
As the quotes above say, the approaches can tell different stories. That’s why median home sales price data (like EHS) may say prices are down, even though the vast majority of the repeat sales reports show prices are appreciating again.
Bill McBride, Author of the Calculated Risk blog, sums the difference up like this:
“Median prices are distorted by the mix and repeat sales indexes like Case-Shiller and FHFA are probably better for measuring prices.”
To drive this point home, here’s a simple explanation of median value (see visual below). Let’s say you have three coins in your pocket, and you decide to line them up according to their value from low to high. If you have one nickel and two dimes, the median value (the middle one) is 10 cents. If you have two nickels and one dime, the median value is now five cents.
In both cases, a nickel is still worth five cents and a dime is still worth 10 cents. The value of each coin didn’t change.
That’s why using the median home sales price as a gauge of what’s happening with home values may be confusing right now. Most buyers look at home prices as a starting point to determine if they match their budgets. But most people buy homes based on the monthly mortgage payment they can afford, not just the price of the house. When mortgage rates are higher, you may have to buy a less expensive home to keep your monthly housing expense affordable.
That’s why a greater number of ‘less-expensive’ houses are selling right now – and that’s causing the median home sales price to decline. But that doesn’t mean any single house lost value.
When you see the stories in the media that prices are falling later this week, remember the coins. Just because the median home sales price changes, it doesn’t mean home prices are falling. What it means is the mix of homes being sold is being impacted by affordability and current mortgage rates.
For a more in-depth understanding of home price trends and reports, reach out to a local real estate professional.
In today’s housing market, there are two main affordability challenges impacting buyers: mortgage rates that are higher than they’ve been the past couple of years, and rising home prices caused by low inventory. To overcome those challenges, many people are working with their agents to find less expensive homes. And with newly built homes making up a historically large percentage of the total available inventory today, that search often includes brand new homes.
The graph below uses the latest information from the Census to show, in June, more of the newly built home sales in this country were in lower price ranges than in 2022:
Last year, only 58% of newly built home sales were less than $500,000. This June, that number was up to 65%. This means more people are buying less expensive newly built homes right now while affordability remains a challenge.
Builders have picked up on this trend and are reacting accordingly. George Ratiu, Chief Economist at Keeping Current Matters, explains:
“Builders are also responding to this shift by bringing slightly smaller homes to market in an effort to meet lower price points . . .”
New data from the Census further confirms this pattern – it shows the median sales price of newly built homes has dipped down in recent months (see graph below):
And as Mikaela Arroyo, Director of the New Home Trends Institute at John Burns Real Estate Consulting, says, the builders who are most responsive to this trend are forming pathways to homeownership:
“. . . it is creating opportunities for people to be able to afford an entry-level home in an area. . . . if you get that size down, that automatically will make it a more affordable home. The [builders] that are decreasing [size] the most are probably the ones that try to build more of an affordable product.”
Builders producing smaller, less expensive newly built homes give you more affordable options at a time when that’s really needed. If you’re hoping to buy a home soon, partner with a local real estate agent to find out what’s available in your area. An agent can help you look at newly built homes or ones under construction nearby.
If you’re having a hard time finding a home you like in your budget, connect with a real estate professional. You need an agent who knows all about the latest inventory in your area, including homes still under construction or just built. That way you have an expert on your side who can provide information on builder reputations, builder contracts and negotiations, and more to help you with the homebuying process.
![Housing Market Forecast for the Rest of 2023 [INFOGRAPHIC]](https://lifeinnewton.com/wp-content/uploads/2023/08/forecast-450x675.png)
While this isn’t the frenzied market we saw during the ‘unicorn’ years, homes that are priced right are still selling quickly and seeing multiple offers right now. That’s because the number of homes for sale is still so low. Data from the National Association of Realtors (NAR) shows 76% of homes sold within a month and the average saw 3.5 offers in June.
To set yourself up to see advantages like these, you need to rely on an agent. Only an agent has the expertise needed to find the right asking price for your house. Here’s what’s at stake if that price isn’t accurate for today’s market value.
Price it too low and you might raise questions about your home’s condition or lead buyers to assume something is wrong with it. Not to mention, if you undervalue your house, you could leave money on the table, which decreases your future buying power.
On the other hand, price it too high and you run the risk of deterring buyers from ever touring it in the first place. When that happens, you may have to do a price drop to try to re-ignite interest in your house when it sits on the market for a while. But be aware that a price drop can be seen as a red flag for some buyers who will wonder why the price was reduced and what that means about the home.
A recent article from NerdWallet sums it up like this:
“Your house’s market debut is your first chance to attract a buyer and it’s important to get the pricing right. If your home is overpriced, you run the risk of buyers not seeing the listing . . . But price your house too low and you could end up leaving some serious money on the table. A bargain-basement price could also turn some buyers away, as they may wonder if there are any underlying problems with the house.”
Think of pricing your home as a target. Your goal is to aim directly for the center – not too high, not too low, but right at market value.
Pricing your house fairly based on market conditions increases the chance you’ll have more buyers who are interested in purchasing it. That makes it more likely you’ll see multiple offers too. Plus, when homes are priced right, they still tend to sell quickly.
To get a high-level look into the potential downsides of over or underpricing your house and the perks that come with pricing it at market value, see the chart below:
So why is an agent essential in finding the right price? Your local agent has the skill and the insight necessary to find the market value of your home. They’ll use their expertise to determine a realistic listing price by assessing:
Pricing your house at market value is critical, so don’t rely on guesswork. Work with a trusted real estate agent to make sure your house is priced right for today’s market.