According to the Dave Mayer in BiggerPockets, no one knows what’s going to happen in the housing market. The global economic climate is very uncertain, and the U.S. real estate market is no different. However, we can extrapolate a bit from the data shown above to explore the most likely scenarios. The housing market on a national level will likely see prices decline on a year-over year basis in 2023. Of all the variables in play, He believes it comes down to affordability. It is simply too expensive for most Americans to buy a home right now. Combine that with the potential for a global recession and rising unemployment in 2023, and it’s not a very enticing market for home buyers. These factors combined should keep demand suppressed for most, if not all, of 2023 and drive prices down. Remember, this is on a national level; each regional market will behave differently. As of late 2022, we’re already starting to see regional housing market dynamics diverging. For example, consider inventory levels (as measured by months of supply) for Philadelphia, Pennsylvania and for Austin, Texas. Both cities have seen their inventory levels rise from their pandemic lows in the second half of 2022.However, Philadelphia inventory remains below pre-pandemic levels, indicating it is still in a relatively strong.
Last, he mentioned the market trends as follows:
- Markets that saw the largest increases from 2020-2022 have the highest probability of decline in 2023-think markets like Boise, Reno, Las Vegas, and Austin.
- Markers with low affordability are poised for the largest drops. Cities like Denver, Seattle, and San Francisco-all with a history of low affordability-are vulnerable to the biggest price corrections. Moody’s Analytics believes some of these cities could see a drop of 20 percent to 30 percent in the worst-case scenario.
- Markers that seem the best insulated against declines are in the Midwest , Northeast , and southeast. These markets saw more modest appreciation in 2020-2022 and are therefore less susceptible to declines.
Despite the prospect of declining prices, there are still strong opportunities to invest in real estate. What you should do is to adjust your strategy to fit the current economic cycle .