It’s been a wild ride in real estate over the past few years. After a scorching market characterized by bidding wars, low interest rates and high prices, mortgage rates hit a 20-year high, leading to a slowdown in buying activity and mortgage prices. ‘purchase.
Yet with inventory still low, home prices remain high, including in the Philadelphia area.
There are many predictions about how the housing market will develop in 2023. But what about further? After all, buying a home often requires long-term planning. We asked several residential real estate experts for a five-year forecast of the housing market. I’m watching you, 2027.
But first, a snapshot of the residential real estate scene nationwide, as of fall 2022.
Home sale price: The median selling price of existing homes rose 8.4% from a year ago to $384,800, according to September 2022 data from the National Association of Realtors (NAR). For new homes, the current national average selling price is $470,600, up about 14% from a year ago, says Danushka Nanayakkara-Skillington, assistant vice president, National Association of Homebuilders (NAHB) forecasts and analysis.
Inventory: Although higher than it was in January 2022, housing supply remains historically low, says Lawrence Yun, NAR’s chief economist and senior vice president of research. The inventory of unsold existing homes was at a 3.2 month supply in September 2022.
Days on the market: With inventory still tight, homes continue to sell quickly. In September 2022, the median days on market for homes sold ranged from 13 to 23, depending on price, according to September NAR data. In a more typical market, it’s 45 days, Yun says.
Houses sold: Fewer existing homes are selling nationwide. According to September NAR data, in 2022 the total seasonally adjusted figure fell from 6.49 million in January to 4.71 million in September. Meanwhile, sales of new single-family homes in July 2022 were at a seasonally-adjusted annual rate of 511,000 — down 29.6% from July 2021, according to the US Census Bureau and the Department of Housing and Urban Development.
30-year mortgage rates: According to Freddie Mac, as of November 10, the current average 30-year fixed mortgage rate was 7.08%, the highest in 20 years.
The new house begins: According to Nanayakkara-Skillington, the seasonally adjusted annual rate of new single-family home starts is 892,000, down 18.5% from a year ago.
Mortgage interest rates could continue to rise for a few weeks or months, Yun said, adding that 7% appears to be the level for the rest of this year and most of next year. Within two years, the rate should return to 5.5% or 6%, he adds. Nanayakkara-Skillington agrees, predicting rates will drop to around 6% by mid-2024.
Yun expects no changes or minor changes in purchase price tags nationwide next year, with increases or decreases of about 5%. The only exception is California, he says, where the market could see a 10% drop: “Because it’s so expensive, California is always the most vulnerable to changes in interest rates. Overall, in five years, he expects prices to have appreciated a total of 15-25%.
Although it showed bubble-like properties, the residential real estate market is not expected to burst violently, Yun expects to. Although he predicts sales will bottom out next year, with just 5.3 million units sold, he expects a gradual increase thereafter, up to six million annual units by 2027. .
Despite higher mortgage rates, house prices are still higher than they were a year ago, he adds. Even if they fall by 5% next year, it’s not close to collapsing – which is characterized by a drop of a third.
“A 30% decrease won’t happen because there isn’t enough inventory,” he says. “A crash occurs with oversupply.” He thinks the housing shortage will continue this year, with supply balancing out within five years.
Yun expects the seller’s market to continue, while housing stock remains low. Within five years, however, he predicts a balanced market, where neither buyer nor seller dominates. Instead, the bargaining power between the parties will be more equal and will depend on the individual case.
Caroline Feeney, editor of HomeLight, believes that the abandonment of the seller’s market has already begun. According to a recent survey conducted by the company, only 51% of HomeLight agents described their current local market as a seller’s market. She also expects a balanced market within a few years.
As hybrid work schedules become the norm and commuting is no longer as relevant, Yun predicts the suburban market will continue to be strong. Meanwhile, 55% of top HomeLight agents believe the markets that have warmed the fastest during the pandemic (including Austin, Phoenix and Boise) are likely to be the first to cool down and experience the biggest declines during a market correction, says Feeney. Yun expects growth in areas with growing populations, namely the Carolinas, Florida, Texas and Tennessee. In support of his prediction, 50% of new single-family construction is in the South, Nanayakkara-Skillington notes.
The number of single-family homes under construction has fallen over the past four months. By contrast, the number of multi-family homes being built has increased in recent years, says Feeney, who attributes the growth in part to their lower prices — apartments tend to be cheaper than single-family homes — and pressure. exercised on municipalities to alleviate shortages. and provide more affordable housing.
Still, with high mortgage rates and inflationary prices for building materials, Nanayakkara-Skillington expects growth in the multifamily market to stabilize within a few years, with the number of new housing starts declining by 8% in 2023 and an additional 5% in 2024.
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