Source: Total Mortgage —
The housing market is one of those asset classes that get better with time. Historically, home values rise even if there are stretches in between when the market slows down. For example, in the five-and-a-half decades leading up to 2022, home prices adjusted for inflation climbed higher by 4.23 percent annually, according to statistical data from the U.S. Bureau of Labor.
However, in 2022, the U.S. housing market was up against a perfect storm of economic headwinds, including rising interest rates, high inflation, and the looming threat of a recession.
As of December 2022, the 30-year fixed rate mortgage finally fell below 6 percent after rising above 7 percent in September.
The housing market can change drastically from year to year. Considering that historical results don’t guarantee future performance, we thought now would be an excellent time to explore the housing market trends and predictions for the next five years: 2023 to 2026.
Housing Market Predictions for the Next 5 Years
Heading into 2023, demand in the real estate market continues to surpass supply, which bodes well for the next five years in terms of market trends and predictions, according to the National Association of Realtors (NAR).
However, there are different perspectives considering the future of the housing market. Let’s get into it.
The 2022 Housing Market Landscape
It has been tough sledding for homebuyers this year. Builders had to contend with the cancellation of construction, mortgage rates were rising, and home sales sunk. However, Realtor.com believes home prices are poised to increase between the end of 2022 and the end of 2023 compared to the NAR’s call for a 2.5 percent increase.
All told, it has been a chilly real estate market in 2022 due to a perfect storm of rising mortgage rates, sellers waiting on the sidelines to list their homes until market conditions improve, and buyers not being able to afford the same home they could afford a year ago.
Housing Market Predictions 2023
Zillow predicts home values will rise by 1.3 percent in the next 12 months ending September 2023. The company also warns that based on the pace of pending home sales activity and mortgage applications, there are “significant downside risks to home sale volumes into 2023”.
CoreLogic Chief Economist Selma Happ suggests that thanks to a combination of depleting housing inventory, easing mortgage rates, and improved economic data, real estate values could stabilize in 2023.
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