Last November, Windermere Chief Economist Matthew Gardner announced 10 real estate predictions for 2023. But now, with the year nearly half over, Gardner has reviewed and revised some of those forecasts.
Original prediction: Sales prices will fall in 2023
Gardner’s first forecast was that sales prices would fall in 2023 without any sort of systemic decline in values. So far, prices are down by about 2% year over year; however, prices rose by 3.6% from March to April.
Despite this, Gardner said he’s standing by his original prediction that the median sales price for 2023 will be lower than that of 2022.
Original prediction: Mortgage rates will remain high until the fall
Gardner’s second prediction was that mortgage rates would stay above 6% through the fall then dip into the high 5% range. Given the current state of mortgage rates, he says it’s very unlikely his original prediction will come true before the end of the year.
“I still expect them to drop into the fives, but not until early next year,” Gardner added.
Original prediction: No significant increase in inventory
With months of inventory still well below the amount seen in a balanced market, Gardner maintains his original prediction that there won’t be a significant enough increase in inventory to give an advantage to buyers throughout the rest of 2023.
“By my calculations, there could be over 20 million homeowners with mortgage rates around 3%. Why would they move?” Gardner said. “With the share of homes with price reductions dropping and list prices rising again, I just can’t see a buyer’s market appearing this year.”
Original prediction: Listing prices will pull back
Overall, Gardner’s prediction that list prices would decrease in 2023 has proven to be inaccurate so far.
“Sellers have been pretty bullish … this year,” Gardner stated. “But I would add that this is not true across the whole country. List prices are still down significantly in markets where list prices for single family homes are down between 30% and 50% from their peak.”
Original prediction: Work-from-home trends won’t end
As predicted, workers aren’t returning to their workplaces in very large numbers with professionals in many industries still working remotely. Despite many companies setting “return-to-office” dates for the first few months of the year, nearly half of all workers are still at home.
Though the share of people working from home did fall to 43% in the second quarter of 2023, down from 49% in the first quarter, the amount of companies with hybrid work arrangements rose 10 percentage points to 30%, indicating that the work-from-home era is far from over.
Original prediction: New home construction will slow
One of Gardner’s original forecasts was that balancing homebuilding costs with buyer budgets would lead to less new home construction.
“With new home permits down 21% year over year, and new home starts off by 28%, I think it’s accurate to say that activity in the new construction sector has slowed,” Gardner said. “Builders continue to be hit by high financing rates as well as high material prices.
Original prediction: Markets where home prices rose fastest will experience the hardest declines
While Gardner’s forecast about sale prices relative to 2022 high has been accurate in many cities, like Johnstown, Pennsylvania (-39.1%); Peoria, Illinois (-23.8%); San Francisco (-22.5%) and Trenton, New Jersey (-22.5%), there are also many cities in the U.S. where prices have already exceeded 2022 highs. Such cities include El Paso, Texas; Sarasota, Florida; Naples, Florida; Savannah, Georgia and Jacksonville, North Carolina.
Original prediction: Affordability will not improve
This prediction has remained true throughout 2023 “mainly due to home prices being out of sync with incomes,” Gardner explained, “as well as financing costs well above the level that buyers had become used to.”
Gardner says he’s maintaining his original prediction and believes affordability won’t change throughout the rest of the year.
Original prediction: Governments will address the housing shortage
Gardner’s final 2023 forecast was that governments at the local, state and national level would begin to address the growing housing shortage in America. This has proven to be true. Gardner cites Washington House Bill 1110, The New York Housing Compact, Florida Senate Bill 88, the Make Virginia Home Plan and Montana Governor Greg Gianforte’s housing taskforce as a few of the legislative actions that have been taken to improve the housing supply.