The housing market will likely shift “firmly in favor of buyers” in 2023, according to economists and housing experts polled in the Zillow Home Price Expectations Survey (ZHPE). Those surveyed suggested high mortgage costs are driving down competition among home shoppers in the housing market. The panel of experts also forecasts rent growth will outpace inflation during the next 12 months.
The forecast of the panel surveyed by Zillow echoes sentiments shared by Zonda senior managing principal Tim Sullivan during the most recent National Housing Market Update webinar.
“Six months ago, we were absolutely a seller’s market. But every month [since then], we’ve been moving more and more toward a buyer’s market and moving quickly,” Sullivan said during the webinar. “I think we are [moving toward a buyer’s market], and we will continue to see that, certainly as interest rates stay higher.”
Home value growth, which hit record levels during the course of the pandemic, is now slowing as affordability challenges and rising mortgage rates are pushing many prospective buyers to the sidelines, according to Zillow. While home price growth has slowed, listings’ time on the resale market is 11 days shorter than in 2019 and inventory is down almost 42% compared with 2019, Zillow says. However, the majority of the panel surveyed for the ZHPE expects a “significant shift” in buyers’ favor by “sometime next year.”
While affordability remains a concern, prospective buyers still able to afford homeownership are experiencing a calmer market and are regaining lost leverage. Respondents to the ZHPE unanimously projected home price deceleration in 2023, a positive sign for buyers currently sidelined in the market.
Midwest markets, such as Columbus, Ohio; Indianapolis; and Minneapolis, are the least likely to experience home price declines over the next 12 months, according to ZHPE survey respondents. Conversely, markets that experienced some of the largest price growth over the course of the pandemic—including Boise, Idaho; Austin, Texas; and Raleigh, North Carolina—are the markets most likely to experience price declines over the next 12 months, according to Zillow.
While home prices are projected to cool in 2023, respondents forecast that rent growth will remain strong in the short term. Over the next 12 months, ZHPE respondents expect rents to grow more than inflation, stocks, and home values (averaging 5.4% rent growth throughout 2023).
The Zillow Home Price Expectations Survey generated responses from 107 housing market experts and economists between Aug. 16 and 27.
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