What a rollercoaster of the year 2022 has been in the real estate market.

We started the year with bidding wars, multiple offers, and mortgage rates in the low 3% range and are ending the year with price reductions, seller incentives, and mortgage rates just over 6%.

We had never seen mortgage rates more than double in such a short period of time and when they did, home buyers put the brakes and flat-out stopped. As a result, home prices started to fall which led to speculation about what was next.

In this blog post I dive into an article I found recently in Fortune Magazine that compiles the 20 leading expert predictions for the 2023 housing market and if you think they’re all on the same page, keep reading!

2023 Housing Market

Questions about the 2023 housing market seem to be everywhere. At holiday events I’ve been to the last couple of weeks questions about what I think the real estate market is going to do next year have been plentiful.

I’m not surprised considering the roller coaster we’ve been on in 2022. As mentioned above, we saw multiple offers and bidding wars come to an end, mortgage rates more than double in the shortest period of time ever recorded, and have recently seen mortgage rates fall again at the fastest pace since 2008.

Even the experts can’t agree on what to expect in 2023!

I came across an article in Fortune Magazine recently that compared 20 different expert opinions. Those opinions range from price declines of up to 20% to price increases of just over 5% and also compared the current situation to what we experienced in the mid-2000s.

Back in the early 2000s, short-sighted lenders gave out loans (or better put, subprime mortgages) to homebuyers who historically wouldn’t have qualified. As buyers tapped into that credit, both home prices and homebuilding levels soared. That party finally stopped once Fed tightening pushed the U.S. housing market into correction mode in 2006. In the years that followed, that building boom turned into a supply glut and those bad loans turned into a foreclosure crisis. That combination of oversupply and “forced selling” saw U.S. home prices fall 26% between 2007 and 2012. 

Fast-forward to 2022, and Fed tightening has once again pushed the U.S. housing market out of boom mode and into correction mode. This time around, however, there’s neither a supply glut (inventory remains well below pre-pandemic levels) nor a glut of bad loans (which got outlawed by Dodd-Frank in 2010).

So home prices shouldn’t fall, right? 

Not so fast: A growing chorus of research firms are now predicting that U.S. home prices will fall in 2023. That’s a view held by firms like Morgan Stanley, Zonda, KPMG, John Burns Real Estate Consulting, Moody’s Analytics, Goldman Sachs, Pantheon Macroeconomics, Redfin, Capital Economics, Wells Fargo, Fannie Mae, Amherst, ING, and Zelman & Associates. (A smaller group of firms, including CoreLogic and Realtor.com, predict a small rise in 2023 home prices.)

Of course, U.S. home prices as measured by the Case-Shiller National Home Price Index are already down 2.2% between June and September. That marks both the first monthly home price decline since 2012, and the second biggest home price correction of the post–World War II era. 

How can home prices fall even if inventory levels remain low, jobless levels are low, and household finances are strong? It boils down to what Fortune calls “pressurized” housing affordability: Spiked mortgage rates, on-top of the Pandemic Housing Boom’s 40% run-up in home prices, has seen housing demand crater. That swift pullback in demand, has left some sellers, like homebuilders and iBuyers, little choice but to slash home prices. 

It’s important to point out that all the forecasts in the article are based on national averages and this will play out differently depending on where you live.

For example, the article says home prices fell an average of 26% during the housing crash, but in Southern CA where I was at the time, we saw price declines of 40%, 50%, and even 60% in some communities.

Among bearish forecasters, seven firms believe U.S. home prices could fall around 20% if mortgage rates remain elevated in 2023.

But even if home prices did crash 20%, it shouldn't cause a 2008-style financial crisis nor a foreclosure crisis. Home prices simply went up so high and so fast during the Pandemic Housing Boom that a 20% decline—which would take us back to February 2021 price levels—wouldn't put that many borrowers underwater.

Here are all 20 of the expert predictions for 2023;

To get an idea of where U.S. home prices might be headed, Fortune rounded up all the major housing forecasts. Keep in mind, when a group says "U.S. home prices," it's talking about a national aggregate. No matter what comes next, it'll surely vary by market.

Realtor.com: The economics team at Realtor.com predicts that the median price of existing homes will rise 5.4% in 2023.

CoreLogic: The firm predicts that U.S. home prices will rise 4.1% between October 2022 and November 2022. (Here is CoreLogic's latest risk assessment for the nation's 392 largest regional housing markets.)

Home.LLC: The firm predicts U.S. home prices to rise 4% in 2023.

Mortgage Bankers Association: The firm expects U.S. home prices to rise 0.7% in 2023, followed by a 0.1% decline in 2024.

Zillow: Economists at the home listing site expect U.S. home values to rise 0.8% between Oct. 2022 and Oct. 2023. (You can find Zillow's metro-level 2023 forecast here).

Freddie Mac: The firm's forecast model has U.S. home prices falling 0.2% in 2023.

Fannie Mae: Economists at the firm predict U.S. home prices will fall 1.5% in 2023, and another 1.4% in 2024.

Redfin: The firm's baseline forecast predicts that the median sales price will fall 4% in 2023. "Prices would fall more if not for a lack of homes for sale: We expect new listings to continue declining through most of next year, keeping total inventory near historic lows and preventing prices from plummeting," writes Redfin economist Taylor Marr.

Amherst: The real estate investment firm, which owns a massive portfolio of single-family homes, tells Fortune that its forecast model has U.S. home prices falling 5% between September 2022 and September 2025.

Wells Fargo: The bank's forecast model has U.S. home prices falling 5.5% in 2023. "Markets where home prices shot the highest are now vulnerable to a disproportionate swing to the downside, notably in previously white-hot markets in the Mountain West which saw an influx of remote workers at the onset of the pandemic. Home prices in desirable locations with comparatively tighter supply are likely to hold up much better," write Wells Fargo researchers.

Capital Economics: Peak-to-trough, the firm's forecast model has U.S. home prices falling 8%.

Goldman Sachs: The investment bank expects U.S. home prices to decline between 5% to 10% from peak-to-trough—with its official forecast model predicting a 7.6% decline. “Economists at Goldman Sachs Research say there are risks that housing markets could decline more than their model suggests…based on signals from home price momentum and housing affordability,” write researchers at Goldman Sachs.

ING: Peak-to-trough, the firm tells Fortune that it expects U.S. home prices to fall between 5% to 10%. However, the multinational bank says it's possible that U.S. home prices could decline up to 20%.

Moody's Analytics: The firm expects a peak-to-trough U.S. home price decline of 10%. But if a recession were to manifest, the firm would expect peak-to-trough decline to be between 15% to 20%. “Affordability has evaporated and with it housing demand... Prices feel a lot less sticky [right now] than they have historically. It goes back to the fact they ran up so quickly [during the pandemic], and sellers are willing to cut their price here rapidly to try to close a deal," Mark Zandi, chief economist at Moody’s Analytics, tells Fortune. (You can find Moody's Analytics' latest forecast for 322 markets here.) 

Morgan Stanley: The Wall Street bank expects home prices to fall around 10% between June 2022 and the bottom in 2024. If mortgage rates fall by more than expected, Morgan Stanley researchers say that peak-to-trough decline comes in closer to 5%. However, if a "deep" recession manifests, Morgan Stanley predicts U.S. home prices could crash 20% from peak to trough—including up to an 8% home price decline in 2023 alone.

Zonda Home: Peak-to-trough, the real estate analytics firm tells Fortune that its forecast model foresees U.S. home prices falling 15%.

KPMG: Peak-to-trough, the Big Four accounting firm expects U.S. home prices to fall at least 15%. “It was a pandemic-induced [housing] bubble, which was stoked by work-from-home migration trends: high-wage workers going to lower second-tier middle markets for more space... Once you start the process of prices falling nationally, there is a self-fulfilling momentum to it, because no one wants to catch a falling knife," Diane Swonk, chief economist at KPMG, tells Fortune.

Zelman & Associates: Back in the summer, the boutique research firm forecasted that U.S. home prices would fall 4% in 2023 and another 5% in 2024. Fast-forward to November, and Ivy Zelman, founder of the firm, says we could now see a 20% peak-to-trough decline. 

Pantheon Macroeconomics: The firm expects U.S. existing home prices to fall by around 20%.

John Burns Real Estate Consulting: Peak-to-trough, the real estate research firm's revised forecast has U.S. home prices falling 20% to 22%. That forecast is based on the assumption that mortgage rates stay relatively close to 6% through 2023

In Frisco, our home prices peaked in April while Prosper saw prices peak in May. Between the peak and August, Frisco saw the median sales price decline by 17% and Prosper by 13%. As such, locally we have already seen home prices decline near the top end of the peak-to-trough forecast range.

Since August, home prices locally have remained fairly stable and although buyer activity has slowed, inventory has continued to decline which has brought our market more in balance.

Although I wouldn’t be surprised to see prices decline a little further as we head into the 1st quarter of 2023, the leading indicators currently don’t indicate we will see further large declines.

If you’d like to stay up to date on the latest market activity, and trends, consider subscribing to my Weekly Market Report. Here is the latest Frisco Market Report. From this report, you can search any zip code/city of interest to see the latest local market data.

Bottom Line

The only person who knows when the right time for you to buy or sell a home is you! My goal is to provide you with the most up-to-date information and insights to help you make that decision. If you have questions, or a specific situation you would like to discuss in more detail, please Schedule a Call with me.

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