The housing market is making it more obvious that the era of historically low mortgage rates and the housing bubble is over. Here are some predictions made by real estate professionals for 2023 as 2022 draws to a close.

Danielle Hale, Realtor.com chief economist: The home market in 2023 might feel more like a nobody’s market after several years of a clear sellers’ market. In the form of 22.8% more homes for sale, we anticipate some benefits for buyers; nevertheless, the rise will primarily be the result of homes taking longer to sell under difficult affordability conditions. For-sale homes will continue to be expensive; the national annual median price is predicted to increase by 5.4% in 2023, which is less than half the rate seen in 2022. If homeowners opt to enter the market and are successful in finding a buyer, they will likely exit the sale of their property with a sizeable amount of equity. However, as buyers and sellers retreat from a housing market and economy in transition, we anticipate house sales will be significantly lower overall, down 14.1% from 2022. We anticipate that by the end of 2022, the yearly total for 2023 will roughly match the current pace of home sales.

Since home expenses are higher than what many would-be first-time buyers can afford, 2023 will likely mark the postponement of a dream rather than a celebration. Increased rental demand may keep rents rising as fewer households decide to become homeowners. Even as an inflow of new multifamily housing helps to better satisfy rental demand, the median rental price is expected to rise 6.3% nationwide. Renters who want to save money in the coming year could think about relocating further out into the suburbs.

Although incomes will continue to grow faster than historically average (3.9%) due to a continuing robust labor market, they will not outpace anticipated inflation (4.1%), which means that many households will continue to face difficult financial decisions. The top real estate performers this year are predicted to be modest, mid-sized domestic industry clusters in the Northeast, South, and Midwest, breaking years of high-flying tech cities dominating real estate who’s-who lists. In 2023, the real estate markets in these places that are steady and steady and where homes are still affordable will shine because they can better withstand the challenges that lie ahead in terms of affordability.

 Bob Pinnegar, president and chief executive officer of the National Apartment Association: In the coming year, finding ethical and lasting solutions to our country’s housing affordability dilemma will continue to be a top concern. Alarming supply/demand imbalance is the root cause of our country’s affordability issues, and we must build 4.3 million additional apartments by 2035 to adequately address it. On the economic front, supply chain problems have started to get better and should keep getting better in the coming year. Although employment is stable, the labor market has difficulties in fields like construction where people are required. Although there are indications that inflation is beginning to slow down, none of these effects are anticipated to materialize until the end of 2023.

State and municipal legislatures still contemplate unfavorable regulations like rent control, which has been repeatedly shown through more than 40 years of academic research and real-world case studies to be ineffectual in addressing affordability. Rent control distorts the housing market by discouraging the construction of new rental housing and hastening the degradation of the stock of existing homes. The rental housing sector will continue to promote sensible solutions that will address affordability issues over the long term, such as rejuvenating Section 8 and lifting restrictions on apartment development, when these policies are considered.

 Nick Bailey, president and CEO of RE/MAX, LLC: I can guarantee that no matter the macroeconomic circumstances, Americans will continue to buy and sell millions of homes in the year 2023. Most individuals generally approach the topic of the housing market’s overall health from the perspective of an investor when we discuss it. Has the market reached its peak or will it bottom out? That’s an essential discussion, but the reality is that people get married, get divorced, move to take care of elderly relatives, move for job possibilities, and so on, every single day. And for those folks, it’s more important to consider their current situation and whether they can afford a home that meets their needs than it is to focus on the interest rate or mortgage rates that week. I’m hopeful that the spring selling season of 2023 will be a plus as inflation levels become more under control. Extreme demand will still exist because there is a massive cohort of Millennial home buyers who are ready to buy homes and because there is a severe shortage of space for new building. 

Lawrence Yun, chief economist for the National Association of Realtors and senior vice president of research: Atlanta will be the most important real estate market to monitor in 2023 and beyond, with 4.78 million existing homes sold and prices remaining consistent. Home sales will drop 6.8% from 2022 (5.13 million), while the median home price will only rise by 0.3% from this year ($384,500) to $385,800. Small price increases or drops could occur in one-half of the country while they occur in the other. Californian areas, though, might be the exception, with San Francisco, for instance, likely to experience price declines of 10-15%. Following a 7% increase in 2022, rent costs will climb by 5% in 2023. Less than 1% of all mortgages will experience a foreclosure in 2023, which is an unusually low percentage. The gross domestic product will increase by 1.3%, which is less than half the historical average growth rate of 2.5%. The 30-year fixed mortgage rate will reach 7% in late 2022 before settling at 5.7% as the Fed eases off on rate increases to rein in inflation. That is less than the 8% historical pre-pandemic rate.

Selma Hepp, interim lead of the Office of The Chief Economist at CoreLogic: Real estate activity and consumer perception of the housing market have declined with the recent rise in mortgage rates to above 7%. In October, home price growth remained close to single digits, and it will continue to do so through the rest of the year and into 2023. Even while several housing areas have underperformed since the spring price peak and are predicted to experience losses in 2023, dwindling for-sale inventories, a temporary halt to mortgage rate increases, and generally encouraging economic data might eventually help stabilize home values.

Marc Minor, CEO and co-founder of Higharc: The exodus to the suburbs will continue in 2023. In 2023, smaller cities will prosper. Millennials who were previously waiting on the sidelines will settle in when the debate about remote versus in-office work settles down, though probably not in the large cities where they first started the pandemic. For the past 60 years, on average, more than 900,000 new homes have been constructed each year. Today’s new construction is concentrated in smaller urban areas. In 2023 and 2024, expect this dynamic to influence housing. According to the steady pace we saw before to the pandemic, new constructed residences will be released into the market. The United States has a shortage of 3.8 million homes, which is no secret. There is a strong demand, and there has never been a greater need for the building of new dwellings.