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Homesellers should prepare for the housing market to swing firmly in the favor of buyers before the end of 2023, according to a panel of 107 economists and housing experts.
A majority of experts on the panel, surveyed by Zillow, agreed that rising mortgage rates are driving down competition among homebuyers, which will eventually result in a buyers’ market taking firm by the end of next year.
The panel also observed that home price appreciation is slowing as a result of high mortgage rates, and it predicted that rental price growth will come to outpace inflation as potential homebuyers priced out of homeownership exert more pressure on the rental market.
“After the frantic rush for real estate over the past two years, buyers are finally seeing a calmer market,” Nicole Bachaud, senior economist at Zillow, said in a statement. “Those still able to afford homeownership are quickly regaining lost leverage, but this shift to a more balanced market is still in its early stages. Home shoppers priced out of the market are in a tight spot, though, as high and rising rents could cut further into their ability to save up for a down payment.”
Fifty-six percent of the panel expected a significant shift in buyers’ favor sometime next year. Twenty-four percent predicted that the shift would come in 2024, 13 percent expected it to come in 2025 and 8 percent expected it after 2025.
While the market has cooled, it’s still far from where it was pre-pandemic. According to Zillow’s most recent market report, the typical listings time on the market, while rising, is still 11 days shorter than it was in 2019. While inventory is ticking up, it remains 42 percent lower than it was in 2019.
Panel members predicted that inexpensive Midwestern markets, such as Columbus, Minneapolis and Indianapolis, would be the least likely to see home prices decline over the next 12 months, while fast-growing Southern markets like Atlanta, Nashville and Charlotte were expected to maintain their edge.
The markets the panel expected to cool the most were those that saw the most dramatic growth over the past two years including Boise, Raleigh and Austin, with some of those cities already seeing the most dramatic price decreases.
The panelists predicted annual rent growth of 5.4 percent throughout 2023 — lower than the 8.6 percent annual rent growth they predicted for the end of 2022. All 107 respondents predicted home price depreciation during 2023.
“U.S. home price appreciation is clearly easing up in response to the historic surge in mortgage rates,” Terry Loebs, founder of Pulsenomics said in a statement. “Our expert panel’s mean projections indicate that residential rent price growth is expected to outpace headline CPI inflation over the coming three years and exceed home price growth through at least 2025. Despite softening house prices, this implies that affordability hurdles for prospective first-time homeowners will remain high and persist for years to come.”