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Ask a dozen prominent real estate experts about their expectations for the housing market this year, and you’re likely to get a dozen different answers.
Mortgage rates could fall as low as 5.4 percent by June or even climb to 7.5 percent in that time, according to a group of 11 industry leaders surveyed recently by the home-equity platform Point.
But despite the uncertainty that faces decision-makers this time of year, consensus can also emerge.
Almost all of these prominent industry figures — who range from top economists at major real estate companies to executives of homebuilding and proptech firms — are acting on the assumption that mortgage rates have likely peaked already and should continue to fall throughout the year.
Lower rates could lure homebuyers back into the market in the coming months but perhaps not enough to avoid a decline in home transactions from 2022 to 2023, these experts believe.
And while most respondents viewed price inflation and the Federal Reserve’s efforts to fight it as the biggest challenge facing real estate this year, the rest were eyeing general home affordability or the lack of inventory as the top issues of the year.
“Rates are expected to move lower for the year, and home price growth is expected to cool, both of which will help affordability challenges,” Mike Fratantoni, Mortgage Bankers Association chief economist and one of the survey respondents, said in a statement. “But inventory remains tight, which will put a floor on how far home prices can fall.”
Still, these factors are going to hit some markets harder than others, Fratantoni said. Markets that were hottest during the early days of the pandemic have already gotten hit hard with price declines and could see further bleeding in 2023, he said.
In some parts of the country, a feeling of relative normalcy may even be on the horizon.
“Cities, especially in the lower-cost areas of the country, including many in the Midwest, are likely to see fewer wild swings in home prices, making the homeowning experience more stable and not as exhilarating for sellers or as scary for buyers,” T3 Sixty Vice President of Research Paul Bishop said in a statement related to his survey responses.
By June, the average survey respondent expects mortgage rates to end up under 6.4 percent. By the end of the year, the group expects rates to fall to 5.9 percent on average.
Still, while this type of fall would represent some relief to buyers, it would keep rates significantly higher than the rates on the loans most existing homeowners have already taken out, contributing to a continued disincentive to move.
“Higher mortgage rates will impact inventory levels negatively,” said 75 & Sunny Ventures general partner Spencer Rascoff, who co-founded Zillow and Pacaso. “Many owners will be unable or unwilling to sell because they have a mortgage rate lock-in, meaning they can’t list their home and shoulder a higher mortgage rate on a new purchase. So they’ll just sit tight in their current home.”
As a group, half of the experts expect home prices to fall by at least 5 percent from 2022 to 2023, but there was wider disagreement on this point.
One expert, pointing to the possibility of an aggressive Fed, expects a 10 percent decline in home prices for the full year. Another worried about a lack of inventory expects prices would rise by 4 percent alongside a decline in home transactions.
There was also a wide range of opinions on how many home transactions would occur in 2023. Eight out of 11 respondents expect fewer transactions to take place this year than last, and half of these experts are bracing for a decline greater than 10 percent. But the other three believe an earlier bounce back could be in the cards.
Point’s team shared the full survey results with Inman, but the names behind each series of responses were not disclosed. Here’s the full list of real estate experts who responded to the Point survey:
- Carey Armstrong, co-founder and COO, Tomo
- Paul Bishop, economist and vice president of research, T3 Sixty
- Mike Fratantoni, chief economist, Mortgage Bankers Association
- Eoin Matthews, co-founder and chief business officer, Point
- Skylar Olsen, chief economist, Zillow
- Sheryl Palmer, chairman and CEO, Taylor Morrison
- Emily Paquette, CEO, Inman Group
- Spencer Rascoff, general partner, 75 & Sunny Ventures
- Stephanie Reid-Simons, senior vice president of news, RealEstateNews.com
- Issi Romem, founder and economist, MetroSight
- Seth Sprague, director of consulting services, Richey May