If you’ve been thinking about buying or selling a home this year, you’ll likely want to keep an eye on what housing market experts have to say about the next 12 months. A recent report found that homebuyer confidence dipped to its lowest level in 20 years, but prices are still expected to grow this year. In fact, the average price of a U.S. home sold in the first quarter of 2022 reached $286,000, a number that would have been unimaginable just a few years ago. This trend likely won’t last forever. Real estate experts expect prices to begin falling in early 2023. If you’re thinking about buying or selling a home before prices drop, we’ve compiled a list of experts’ predictions for the housing market in 2022-2023.
Homebuyers believe home prices will continue to rise over the next year. While only 14 percent of respondents said they expected a further increase in prices over the next year, a third part – 33 percent – were not sure about that. However, the good news here is that modern technology will make a home purchase process easier and more straightforward. Thus, with Spotless Agency virtual staging, it is now possible to visualize a real estate object online without actually leaving your home.
According to the Mortgage Minute, the average FICO score for home buyers and sellers is still 708, and buyers still struggle to obtain the loans they need to finance their purchases. The average home buyer’s credit score continues to hover around 680, the same score it was at the end of 2019.
“People have continued to be shut out of the mortgage market,” says David Stiffelman, chief economist at Cox Communications. “Credit standards remain very difficult.” The Mortgage Minute says it expects that home buyers’ credit scores will remain at least as low as 2019 levels, for now.
Although mortgage rates remain at historically low levels, a survey conducted by the National Association of Realtors (NAR) found that homeownership continues to be a strong driver of consumer confidence. According to NAR Chief Economist Lawrence Yun, the homeownership rate rose 1.2 percent during the last three months of 2022. After increasing steadily for more than 10 years, the homeownership rate has now been stuck in a low point for over a year.
The inventory of available real estat objects for sale is rising, and homebuyers’ credit scores are getting better. A report from the National Association of Realtors found that homeownership rates rose in June.
“We expect a surge in housing market activity as consumers’ confidence increases and they become more willing to take the plunge and become homeowners,” Yun says. The average home price increased 0.4 percent during the first three months of 2022. This continues a trend of steady gains for the last few years. But the report doesn’t say how far prices will go over the next 12 months.
“It’s a good sign,” says Stiffelman. “I don’t think there’s anything wrong with the market, but I do think there are more homes available.”
According to the Homeownership Opportunity Index, an average homebuyer can expect to save at least $2,400 a year by owning a home rather than renting. However, the report also found that homeownership could become more difficult for young adults and college graduates because rent prices are rising. This could put them at a disadvantage when it comes to purchasing a home.
Home prices continued to climb through the beginning of the recession. In 2018, the median price of a home sold was $180,000, according to the National Association of Realtors. By 2019, that number had climbed to $230,000. By 2020, the average price of a U.S. home sold hit $259,000.
But prices have been falling since then. Home prices fell 4.9 percent over the last two years. And since last summer, prices have been rising again, though slowly.
“It’s going to take a while to come back,” says Steve Brown, a RealtyTrac senior vice president and chief economist. “After the Great Recession, many homeowners lost their homes. They were underwater on their mortgages. They couldn’t refinance their mortgages. So they were stuck for a while.”
The report warns that homebuyers have fewer options than they did in 2019. The homeownership rate is at its lowest level in more than 50 years, and homeowners who are underwater on their mortgages can’t refinance.
“We were able to take advantage of low interest rates, but that window is closing,” says CoreLogic CEO William Stone. “We’re seeing that home prices continue to increase. We’re anticipating the next downturn is going to be worse than the one in 2008.” CoreLogic expects that the number of homeowners will begin to drop significantly as new buyers enter the housing market. The company predicts home prices will begin falling in early 2023, with home prices declining 0.3 percent from last quarter and dropping an average of 5.7 percent over the next 12 months.