Expert Home Price Forecasts Revised Up for 2023
Towards the conclusion of last year, there were numerous headlines predicting a substantial decline in home prices for 2023. This sparked widespread apprehension and raised concerns about a potential housing market crash akin to the one experienced in 2008. However, these headlines proved to be inaccurate.
While there was a slight correction in home prices following the exorbitant appreciation during the 'unicorn' years, national home prices did not plummet. If anything, they displayed greater resilience than anticipated by many.
Let's examine the forecasts made by experts towards the end of last year in comparison to their most recent projections to illustrate that even these experts acknowledge their earlier pessimism.
Expert Home Price Forecasts: Then and Now This visualization presents the 2023 home price forecasts from seven different organizations. It includes their original forecasts for the year's end (issued in late 2022) regarding the trajectory of home prices and their most recent revised forecasts for 2023 (refer to the chart below):
As indicated by the red section in the middle column, all initial forecasts foresaw a decline in home prices. However, when you look at the right column, you'll notice that all experts have updated their year-end projections to indicate either a stabilization of prices or positive growth. This marks a significant departure from their initial pessimistic predictions.
There are several reasons behind the resilience of home prices to declines. As noted by Odeta Kushi, Deputy Chief Economist at First American:
“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.”
A Look Ahead to Stay Informed Expect misleading media coverage regarding home prices in the upcoming months. This is because there's a natural seasonality to home price appreciation, and the media might misinterpret it. Here's what you should know to stay ahead of the next wave of negative headlines.
As housing market activity typically slows toward the end of the year, so does home price growth. However, this doesn't signify a decline in prices; it simply means they're not rising as rapidly as during the peak homebuying season.
In essence, a slowdown in appreciation is not synonymous with depreciating home prices.
Bottom Line
Despite media predictions of a substantial home price drop at the end of last year, this scenario did not unfold. Reach out so you can have a trustworthy resource to help you discern fact from fiction through reliable data.