What to Expect From the Housing Market in the Second Half of 2023
In the first half, high rates have kept housing in a state of suspended animation, as borrowing costs priced out prospective buyers, while homeowners with mortgage rates of 3% or less are unwilling to sell and face having to borrow for their next home at something closer to 7%.
Rates Will Determine Trajectory of Market.
The Federal Reserve has signaled that more rate hikes may be in store before the end of the year. Once the rate hikes slow or stop, affordability concerns will slowly start to ease, according to Realtor Chief Economist Danielle Hale.
Experts see mortgage rates headed on a more stable path. As inflation is expected to continue cooling, mortgage rates are expected to decline. Another peak is anticipated for June, but Hale predicts it could be the final uptick before conditions begin to even out.
“We think that June will have been another temporary peak in mortgage rates and we’ll see them gradually ease from the 6.7% range they’ve been in recently, down to near 6% at the end of the year, likely hovering just above 6%,” Hale said in an email.
1. Inventory Boost Expected to Help Meet High Demand
As mortgage rates cool, inventory is expected to tick up again throughout the latter half the year. Chronically low inventory of existing homes is dampening market conditions. Analysts at Fannie Mae anticipate low inventory when it comes to existing homes through the end of the year.
Compass CEO Robert Reffkin told CNBC he thinks when rates drop back down to around 5.5%, that’s when the inventory logjam should begin to clear.
2. Home Prices Likely To Decline
Weak home prices are expected over the summer months, when they are typically at their peak, according to Realtor’s Hale.
“Specifically, while June is expected to be the seasonal peak for home prices in 2023, like it is most years, we won’t see as big of a month to month climb as we did in 2022, which will mean ongoing mild declines when we’re comparing home sale prices to one year ago,” Hale said.
The declines are expected to run through the early fall, depending on the Federal Reserve.
As supply boosts and mortgage rates and home prices fall, sales are expected to rise through the end of the year, according to NAR’s Yun.
“We’re likely approaching the bottom in home sales with steady improving home sales in the second half of the year and into 2024,” Yun said.
