Dallas Housing Market - 2023 Housing Market Forecast
So today we are going to get into a couple of articles that talk about the forecast for housing over the next year.
If you own real estate or are thinking about buying or renting any time soon, then you have probably been keeping an eye on what’s been going on.
Here we wanted to show you the DFW area MLS Median Sales Prices over the past 3 years.
After record levels of appreciation during the pandemic housing boom, for the 1st time since 2012, home prices have been coming down.
Right here in the Dallas area, we have seen homes in our local market that we currently have a +8.94% appreciation from last year Nov 2021 to Nov 2022.
Which a person who hasn't been paying attention to what has happened over the past few years would think is great.
But what this number is not telling you, and what has people who own homes freaked out a little bit is, that from the Peak in June of this year 2022, Home prices are actually DOWN -8.08%.
So we have already given back half of the price appreciation from last year’s growth.
Now, there are a couple of articles that I wanted to share:
The 1st article I want to share and talk about is an interview Fortune Magazine had with CoreLogic who had come out with their 2023 projections.
Corelogic is a Housing data think tank that many housing analysts subscribe to for their insights in market trends.
They do not in the article the Fed's current admission that what they have done, is causing a "Difficult Housing Correction"
and, if the Fed is saying this then we should probably listen, as they are not the ones who are going to say things to freak people out unless it is an actual foregone conclusion that it is either happening or about to happen.
They note that unlike the 2000's market correction which saw the US Housing Market fall 27% between 2006 and 2012
This Housing correction is not being caused by bad loans or by a supply glut.
This correction is being driven by what Fortune calls "Pressurized Affordability"
The Pandemic Housing Boom saw US house Prices rise 43% and this is combined with Mortgage rates doubling over the past year
This has pushed affordability out of the hands of many buyers, First time home buyers are being hit the worst since they don't have that built-in equity to use
to buy down rates or put down the down payments required.
There are really only 2 ways for the pressure to be released and correct the affordability issues.
Mortgage Rates must drop back to levels before the rise.
Home prices must fall to a level that people can afford.
We do not see the 1st happening anytime soon with Inflation still very high.
This would likely then require the economy to go into a major recession or worse to have the Feds lower the rates.
So what we ARE seeing then is that prices are beginning to fall, and depending on which market or area you're in, it could be worse than others.
As we noted here in the Dallas Metro, we are down 8% from our highs in June 2022.
But just down the road a bit, Austin is now down over 10%.
They do note that places like Des Moines and Baltimore are still at all-time highs.
So what’s coming next?
CoreLogic analysis assessed the Market on several factors and put the regions in 1 of 5 categories, grouped by the likelihood of decline over the coming year. Those factors are:
Income Growth Projections
Unemployment Forecasts
Consumer Confidence
Debt to Income Ratios
Affordability
Mortgage Rates
and Inventory Levels
Then the 5 categories they grouped them in, in terms of risk of price declines were:
Very High : Over 70% chance of price decline
High : 50-70% Chance of Decline
Medium : 40-50% Chance
Low : 20-40% Chance
and Very Low : 0-20% chance
Now out of the 394 Regional Markets, 354 of them are now rated High or Very High meaning that they have over a 50% chance of Decline in the coming year.
We did notice that the DFW area is purple, thus meaning it has "less than" a 50% chance of a decline.
And of course, this doesn't mean we won’t decline, but the factors are much better in our area than others.
They also noted that NO markets are rated "VERY LOW" currently, meaning most markets will see a decline over the coming year.
One area they noted is the Boise Idaho market which rose 47% year over year due to Californians taking advantage of working from home and escaping the crazy high prices of silicon valley.
Boise is now already negative 4.3% Year over Year.
They also noted that only about 1% of the nation’s 392 biggest markets are now negative year over year.
That takes us to the 2nd article we wanted to talk about.
Norada which is a Real Estate investment resource also came out with an article discussing 2023 housing market predictions.
They noted most experts predict for 2023 that:
There will be Lower Buyer Demand
Lower Prices
and Higher Borrower Rates
The Rate increases and shortage of availability have pushed buyers to the sidelines.
Most experts do predict prices to decline in 2023, but not as drastically as in 2008.
They also note that some believe the housing market will outperform compared to Pre-Pandemic.
So there really is no clarity regarding the 2023 forecast amongst the "Experts".
Most analysts predict housing markets will still grow, but very slightly.
If inflation continues, the FED will keep raising rates and it will most certainly impact the housing market
If inflation falls or recessions develop, the Fed will soften its harsh rates stance.
Now, Fannie Mae recently reiterated its opinion that the Housing Market will push the US economy into a recession at the beginning of 2023.
They estimate home prices could fall in 2023, and that the ESR group predicts a 1.5% fall in national home prices.
The group also predicts home values will fall in 271 markets over the next 12 months.
And as they pointed to another barometer of housing market health, the Federal Housing Finance Agency, their housing Price Index has declined for the first time since March 2011 for 2 consecutive months.
Ironically, our good friend Zillow still predicts a rise in most markets over the next 12 months.
So is it clear yet? 🙂 People who get paid to predict are all over the place in 2023.
So when will we see prices Drop?
It may seem oversimplified, but prices drop when demand is met.
the Problem is that there is now excessive demand for homes in several markets.
There simply are not enough homes to sell to buyers,
New Construction has increased over the years, but not enough, and they are still way behind demand.
So big price drops would require there to be HUGE drops in demand.
Now, demand typically drops with Higher Interest Rates or a General Weakening of the economy where people start worrying about their jobs.
They also note that price growth will likely slow, however, a drastic fall is unlikely noting the previous items of demand.
They note this as a pullback, as any asset class would, after large runs up in values.
They predict that the housing supply will DECREASE in 2023, thus upward pressure on prices will continue.
The National Association of Home Builders group announced that homeowner confidence has declined now for 12 straight months.
They noted that will we have seen a rise in inventory, mainly due to price-weary buyers.
and supply will likely stay limited in 2023.
Think about it, if you own a home and your rate is 3 or 4%, are you going to sell right now? If you don't HAVE to move most people are just going stay put.
But others are still moving, and people are still relocating for multiple reasons, so there are still buyers out there and people still have to sell their homes.
One area they did note where there will be SHARP DECLINES due to mortgage rates rising is in the New Home Build market.
This will be the 1st time since 2011 we see a decline in single-family starts said the National Association of Home Builders chief economist Robert Dietz.
He predicts the homeownership rate will drop over the next few quarters as rates continue to rise and building costs price out a large portion of prospective buyers.
So will Home Prices Drop?
Norada said sellers, buyers, and renters may be unimpressed in 2023.
While mortgage rates did slow the price rise and moved the market away from the extreme seller market.
Slowing in home prices won’t be enough to make it a buyer’s market, as mortgage rates continue to rise.
Home buyers will benefit from a growing number of homes, but costs will stay high, limiting affordability as budgets tighten with the onset of a likely recession.
They noted that 2023 will likely be a stalemate between both buyers and sellers.
Buyers will also have some things to look forward to in 2023.
There will be more homes that take longer to sell, and there will not be intense competition as we have seen in the past.
However, affordability issues will keep 2023 from being a huge buyers’ market.
Especially for First Time home buyers.
Home Sellers need to be aware that there will be fewer buyers looking at their properties as prices and rates will drive some prospective buyers to postpone their purchases.
Thus sellers should expect more competition, lengthier transactions, and conceding more to buyers than they have in the past. But in order to make sure you still get the traction and eyes on your property we still recommend having your home in the best possible shape once you are ready to list it for sale, especially if you want to get top dollar for it.
The Realtor.com 2023 forecasts include:
Mortgage rates at 7.4% and 7.1% by yr end.
Median home price appreciation to still be up +5.4%
Existing Home Sales Year over Year Annual Total to be down 14.1% to 4.53 million
Existing homes for sale Inventory to be up +22.8%
Single Family new construction homes down 5.4% to .9 million
Home Ownership Rate at 65.7%
Rent Growth up another + 6.3%
The Zillow forecast remained unchanged from October which predicts a 1.3% increase in the next 12 months ending with Sept of 2023. They also noted though that this will vary significantly by regional markets, as noted in the CoreLogic article.
Moody's Analytics proprietary housing data forecasts home prices will rise 0% over the next year in 2023. They also predict that home prices will RISE in 183 of 414 of the Country’s largest markets and FALL in 231 of the markets.
Some noted areas predicted to decrease are:
The Villages, Florida (6.96 percent)
Punta Gorda, Florida (6 percent)
Reno (5.57 percent)
Honolulu (5.56 percent)
Spokane, Washington (5.52 percent)
Goldman Sachs also got into the game on predictions for 2023
They anticipate significant drops in New home sales. Currently down 22% from last year and they anticipate a drop of 8% more in 2023.
Existing homes will be down 17% from last year, and they anticipate another 14% loss this next year.
They also predict the Housing GDP to be down 8.9% from last year they'll drop another 9.2% in 2023.
Now there are Some wild cards noted in the game.
Millennials are expected to continue to drive the market and participation of first-time home buyers is forecast to go up.
Many people have been priced out of the market by rising rents and rising mortgage rates.
Theoretically, home prices should fall for the remainder of this year and into 2023.
Rising borrowing prices make credit unaffordable and the economy continues to deteriorate.
But besides all that, economists still predict a robust demand from millennials and high home price increases in the housing market.
NAR Chief Economist Lawrence Yin advised, "Expensive regions of the country especially feeling the pinch are seeing larger declines in sales."
But besides weaker sales, multiple offers are still occurring with more than a quarter of homes selling above list prices due to limited inventory.
This is a huge contrast to 2008 to 2010 when inventory levels were 4 times higher than they are today.
In summary, even with the sluggish economy and buyers in hiding, they still anticipate demand will continue to outstrip available inventory.
Increasing rental costs should also add to the expected outcome.
They predict slower home price growth, but unlikely any big decline in prices.
So that’s it, multiple sources, with several thoughts on what is to come in 2023.
If you found this information valuable, please make sure to hit the like button so we know you liked it and so others may get to see it as well.
We would love to hear your thoughts, so make sure to comment and let us know what you think will happen in 2023 and your insights.
Are they all crazy? or are they on the money with their predictions?
Let us know whether you are thinking of buying, selling, or staying put and why?
We love hearing from everyone so we can get a better understanding of our community and what’s on their minds.
And if we can help you with your move to the Dallas area, or selling your home. Don't hesitate to reach out, give us a call, shoot us a text or send us an email, so we can get to know your needs and how I may be able to help to make that move here to the Dallas area.
And until the next time, take care.
