2023 Summer Housing Market Predictions

2023 Summer Housing Market Predictions

2023 Summer Housing Market Predictions

It’s difficult to predict what will happen in the housing market, even during normal times. Given that the economy is anything but normal right now, predicting what will happen in the housing market over the coming months is pretty much a fool’s errand. But it’s important to have an investing thesis, and it’s also fun, so I will try anyway.

Below I will share my five predictions for the housing market in the summer of 2023 and three important indicators to watch that could change my predictions completely. 

1. Mortgage Rates Will Fluctuate, But Will Remain Between 6.25% and 6.75% 

As of this writing (mid-May), the Federal Reserve raised the Federal Funds Rate 25 basis points at their last meeting but indicated that they are considering a pause going forward. I think the assumption the Fed is done tightening is overconfident, as core inflation remains high and the labor market is exceptionally tight. 

30-Year Fixed Rate Mortgage Average in the United States (2018-2023) - St. Louis Federal Reserve
30-Year Fixed Rate Mortgage Average in the United States (2018-2023) – St. Louis Federal Reserve

Regardless of what the Fed does, I think mortgage rates will stay relatively similar to where they’ve sat for the last few months. Since peaking (so far) in November, mortgage rates have stayed in the mid-6s, despite the Fed raising the FFR several hundred basis points during that time. Bond yields have stayed steady, which means mortgage rates are steady. 

2. Home Prices Will Rise From Winter Lows, But Will Remain Down on a Year-Over-Year Basis

When we look at home prices, we need to look at month-over-month and year-over-year data. Monthly data shows the most recent information but neglects long-term trends. Yearly data does the opposite. 

4-Week Rolling Average of the Median Sale Price of Homes Sold (2020-2023) - Redfin
4-Week Rolling Average of the Median Sale Price of Homes Sold (2020-2023) – Redfin

When I look at sales price data, I see two things. First, seasonal patterns are holding. Prices have risen over the last couple of months after bottoming out in February. This is what typically happens. Secondly, although prices are rising, they are sitting below last year’s prices and are down year-over-year. 

I believe this is likely to continue. In my view, the market will follow seasonal patterns but will remain under last year’s prices at least through August. Although I don’t think it’s the most likely scenario, I think there’s a decent shot the national market actually shows positive price growth sometime after the summer. 

If you’re wondering about my track record with predictions, the last time I made a price prediction was back in the fall of October 2022, and I said I believed the national housing market would be down somewhere between 3-8% by the end of 2023. Right now, the national median sales price is down 2-3%, depending on who you ask, so I’m in range and still see this as the most likely scenario—but a lot can happen before the end of the year! 

3. Home Sales Will Not Recover

Seasonally-adjusted home sales volume is the lowest in about a decade. This tends to put downward pressure on housing prices but also has broad indications for the entire housing industry. Low sales volume hurts agents, loan officers, and other professionals serving the housing industry. 

National Home Sales (2012-2023) - Redfin
National Home Sales (2012-2023) – Redfin

That said, I don’t believe that volume will recover anytime soon because there just aren’t enough properties on the market, even if demand recovers. Which brings me to my next prediction: 

4. July and August Will See the Lowest New Listings On Record

New listings measure how many properties are put up for sale in a given period and are in the gutter right now. Nationally, they are down about 22% year-over-year; in some markets, they’re down more than 60%. There is not much on the market, and I don’t see any signs of that changing in the coming three months. 

National New Home Sale Listings (2012-2023) - Redfin
National New Home Sale Listings (2012-2023) – Redfin

As such, I see this July and August being the lowest totals for those months as far back as I have data. In other words, this July will have the fewest new listings of any July in the last 20 years. Expect the same thing for August. People just don’t want to sell right now. 

5. Regional Differences Will Reign

So far, my first four predictions have all been about the national housing market, but we all know real estate is local. Here are my regional predictions: 

  • The Northeast will see the most price growth over the summer, followed by the Midwest.
  • The South will be a mixed bag. Some markets (like Miami, Florida) will continue to grow, while others (like Austin, Texas) will struggle. 
  • The West will see some markets rebound. It’s been well documented that the West has seen the biggest price corrections to date, but I think that might end in certain markets. Some cities like Salt Lake City, Utah; Los Angeles, California; and Denver, Colorado, have already shown signs of bottoming out, while markets like Boise, Idaho; and Las Vegas, Nevada, still show weakness. 
Median Sale Price of Selected Western Metros (2018-2023)
Median Sale Price of Selected Western Metros (2018-2023)

Things To Watch

The predictions above represent what analysts call a “base case.” This is what I believe to be the most likely scenario. But obviously, I don’t know what will actually happen, and there are reasonable probabilities that the market will outperform my predictions or underperform them. To me, the most likely thing that could shift the market away from my base case are: 

  1. A U.S. debt default: As of this writing, the government is in a stalemate trying to negotiate an agreement on raising the debt ceiling. If that doesn’t happen and the U.S. defaults on its debt for the first time in history, it will almost certainly send mortgage rates up. Zillow recently predicted they would go up above 8%—and when they come back down would be anyone’s guess. If this happens, I think the downside case becomes more likely. 
  2. The labor market: The labor market has been shockingly resilient in the face of rising interest rates, with almost every measurement of unemployment historically low. 
Percentage Change of Continued Claims, Insured Unemployment (2021-2023) - St. Louis Federal Reserve
Percentage Change of Continued Claims, Insured Unemployment (2021-2023) – St. Louis Federal Reserve

The labor market is strong even when you account for part-time jobs and people leaving the workforce. If the labor market “breaks” and unemployment shoots up, it will likely cause a recession, possibly bringing down mortgage rates and helping the housing market. That is, of course, unless the unemployment situation gets really bad (over 6-7%), and then it might negatively impact the market. 

Employment to Population Ratio of Adults, 25-54 (2018-2023) - St. Louis Federal Reserve
Employment to Population Ratio of Adults, 25-54 (2018-2023) – St. Louis Federal Reserve
  1. Geopolitical turmoil: We all know there is a lot of tension with Russia, China, and generally in the world right now. International conflicts can really impact the economy, but there’s no way to know how without knowing the nature of the conflict. I just want to say that if there is some big international issue, it could throw off my predictions. 


This represents my current thinking about the housing market and where it will go over the summer of 2023. But all of this is far from certain. We’ll have to check back in the fall and see how I did with these predictions. 

In the meantime, I’d love to hear your predictions for the 2023 summer housing market in the comments below. 

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

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