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Zillow's 2023 Housing Market Predictions VS. Realtor.com's Housing Market Predictions
Will 2023 Be a Better Year to Buy a House?
Most of the major housing expert sources, such as Zillow, Redfin, Realtor.com have published their housing market predictions for 2023 and housing market predictions for next 5 years.
Let's take a moment and compare and upnpack what the major players are predicting for the housing market in 2023.
First things first, there is no housing market crash on the horizon. Many headlines love to use the term housing market crash as click bait, which is why it is so important to look at the data that is inbetween the headlines.
Let's look at the current state of the housing market locally in San Diego. In 2019 the median sold price for a home was $685,000. In 2021 that peaked to close to $1,000,000. Today the median SOLD price of a home is $800,000. The "crash" is a decline, or deceleration of housing prices from 2021, to 2022, but housing prices have far from crashed.
In fact according to Zillow.com predicts housing prices will end the year with a 9.6% gain. That's far from a crash. Let's look forward to 2023.
Housing Prices Will Fall In 2023
According to Redfin, they expect to see a 4% drop in housing prices. While Zillow expects to see home prices remain somewhat flat. And Realtor.com is expeticing a 5.4% growth. I expect to see home prices drop in San Diego somewhat, but again with the amount of home owner equity, the likelihood of a crash is almost non-existant.
Redfin does go on to say a flatlining of home prices could happen. "Another possible albeit less likely scenario is that prices will stay mostly flat on a year-over-year basis in 2023. That could occur if mortgage rates and/or new listings fall faster than expected, which would prop prices up. But if inflation remains stubborn, rates stay higher than expected, and/or supply increases more than expected, prices could fall by double digits."
Record-high real estate wealth is in large part due to the more than decade-long increase in the price of homes which are expected to notch double-digit gains for a second year in 2022. Soaring prices were propelled by all-time low mortgage rates which are a thing of the past. As a result, home price growth is expected to continue slowing, dipping below its pre-pandemic average to 5.4% for 2023,
Looking more locally California Association of Realtors predicts California’s median home price is forecast to decline 8.8 percent to $758,600 in 2023, following a projected 5.7 percent increase to $831,460 in 2022. With affordability challenges there will be fewer homes being sold in 2023.
Mortgage Rates Outlook
This is where waiting to buy could really hurt home buyers. Realtor.com is predicting rates will see another round of hikes and end up around 7.1% by the end of 2023. Now looking at Redfin's mortgage rate prediction for 2023, "We expect 30-year fixed mortgage rates to gradually decline to around 5.8% by the end of the year, with the average 2023 homebuyer’s rate sitting at about 6.1%. " The bottom line for mortgage rates is the higher rates, over 5.5% are the new normal.
Affordability is THE Biggest Issue
Zillow cites affordability as the number one challenge facing everyone, home buyers and renters as rents have gone up 37% after the pandemic-era surge. Rents have grown faster than wages, making it harder to save up for a down payment. Zillow goes on to predict more people with pull together to buy homes.Friends and family will pool resources together to purchase homes and stop paying rent. This is a fantastic idea, especailly as rents have, and will continue to increase, home buyers can stop paying their landlords equity and start to build their own.
According to Redfin, "Increasing rental supply and declining prices–along with high mortgage rates, limited inventory and other affordability barriers–mean few renters will become buyers next year. Many prospective first-time homebuyers may instead become move-up renters, upgrading from a small urban apartment to a larger apartment or a single-family rental to fit their growing families. Some Gen Zers and young millennials who have saved up some money to buy a home but are able to wait until prices and/or rates come down will focus on financial pursuits other than homeownership next year, like investing in stocks, while they continue renting indefinitely."
Home Owners Still Have Home Equity
“Homeowner equity is at the highest level it’s been in the past several decades, so homeowners have a lot of value in their home,” says Nicole Bachaud, an economist at Zillow. In a housing market crash, you would typically see a 20% to 30% drop in home prices and a decline in home sales—far more than what’s currently happening. Another crash symptom that’s been missing is a jump in foreclosure activity.
Should I Buy a House Now or Wait?
Buying a house—in any market—is a highly personal decision. Because homes represent the largest single purchase most people will make in their lifetime, it’s crucial to be in a solid financial position before diving in. Trying to predict what might happen next year is not the best homebuying strategy.
Look at buying a home as a long term plan to help you not only have your own home that is stable (no one can sell it but you), and a mortgage payment that will not change (landlord's upping the rent), but as a long term plan to build wealth. Homeowners have, on average, twice as much long term wealth than those that rent.
Buying a home is predictable. Use a mortgage calculator to estimate your monthly housing costs based on your down payment and interest rate. This rate should not change unless you opt for a ARM, which can acutally be a good idea in today's mortgage rate solutions. If you can afford the monthly payments, buying a home will give you tax advantages that renting does not have.
So, instead of waiting for much lower prices, buy a home based on your budget and needs. If you find a home you love in an area you love, and it also fits your budget, then chances are it might be right for you. However, if you make too many sacrifices just to get a house, you may end up with buyer’s remorse and an expensive albatross you might have to offload.
Should I Sell My House Now or Wait?
Selling a home is a very big decsions and is usually driven by some external force. People often sell homes for reasons such as job changes, family expanding or downsizing. When you are thinking about selling your home, it is important to look at your equity and make a solid plan. Homes that are priced well are selling, especially in San Diego as our economy continues to grow.
Tips for Selling in a Hot Housing Market
The first step for a successful sale is to find a listing agent who knows the area and comes highly recommended. A good agent will work closely with you to price your home competitively while fielding questions and offers from prospective buyers.
Even though the market may still be tipped in your favor, it’s in your best interest to present your home in the best possible light. Not everyone has cash dedicated to renovations and repairs, but a little sweat equity can go a long way. The first step is to declutter, organize and clean. Even if your home is outdated, a clean space gives buyers a chance to envision the house’s potential.
Frequently Asked Questions (FAQs) from Forbes.com
Will rising interest rates lower home prices?
Historically, rising mortgage rates don’t always lead to lower home prices. Rising interest rates tend to cause increases in home values to shrink. However, given that interest rates have risen so quickly this year, they might force home prices to come down. Home price trends also depend on whether supply can keep up with demand.
What will happen if the housing market crashes?
Most experts do not expect a housing market crash since many homeowners have built up significant equity in their homes. The issue is primarily an affordability crisis. High interest rates and inflated home values have made purchasing a home challenging for first-time homebuyers.
Is it smart to buy real estate before a recession?
If you’re in a financial position to buy a home you plan to live in for the long term, it won’t matter when you buy it because you will live in it through economic highs and lows. However, if you are looking to buy real estate as a short-term investment, it will come with more risk if you buy at the height before a recession.
