Housing Prices Prediction 2023
The residential real estate market concerning housing pricing 2023 in the United States is undergoing processes that dangerously resemble those that led to its collapse in 2008 and the consequences of which were felt by the whole world. Analysts are still afraid to use the term collapse, realizing that one carelessly spoken word can cause this process in real life in an alarming atmosphere. Nevertheless, everyone understands that there is no smoke without fire.
Is the housing market going to crash?
The very fact that in August a rapid number of search suggestions on the Internet grew, empathizing with the phrases collapse of real estate market, which are a harbinger of growing uncertainty in this area in the United States and Canada, whose economy is as synchronized as possible. According to real estate agencies intelligence, such a proposal has risen to 177% in comparison to the month of the year .
A sharp jump in inquiries about the possible collapse of the housing market means that homeowners and tenants are increasingly thinking about their future and feeling more nervous, rental rates will continue to go up, consumer opportunities of the population will decrease. This means that people will no longer be able to afford to rent or buy housing at current prices.
Analysts agree that in the rental housing market in the USA and Canada in recent years (specifically, in the period from 2020 to 2022), a bubble has inflated, which is about to burst. When it bursts, the prices for sale and rent will inevitably decrease (analysts call the deadline around the beginning of 2023). However, tenants somehow and somewhere else will have to live up to the beautiful time when they will again be able to afford the luxury of having their own corner.
In the meantime, real estate experts are struck by the complete illogicality of the current situation, when, according to all the laws of the economy, prices should fall, but for some reason this does not happen. On the contrary, rental prices in 2022 were the highest since 1986.
Will housing prices drop in 2023?
The increased rates of the Federal Reserve System of the Federal Reserve (USA) and the increased mortgage prices reduce the demand for housing in the United States of America, which will lead to a 20% decrease in market prices in 2023. This was reported by CBS with reference to the forecast of Ian Shepherdson, chief economist at the research company Pantheon Macroeconomics.
"We expect that the decline in home sales will continue until the beginning of next year. By that time, the buyers' market will mainly be people who buy houses for reasons such as changing jobs, moving due to family circumstances, etc.," said Shepherdson.
During the COVID-19 pandemic, housing prices in the United States rose to a record high. According to the US residential real estate price index S&P CoreLogic Case-Shiller Indices from S&P Dow Jones Indices, prices increased by 18.8% in 2021 alone, breaking the record of 1987. And in some regions of the United States (New York, Atlanta, Austin, Canadian Charlottetown and other regions of the United States and Canada), the rate of the coronavirus pandemic increased to a fantastic 50%. Average monthly rent in August 2022 year is $2000. (in June $1717). For the last decade the rent increased 3-4%. But in the semi-annual period of the year, the annual salary is still anomalous — 17%.
When will house prices drop?
In September, the research company CoreLogic reported that housing in the United States decreased in price by 0.3% in July 2022 compared to June. In July, the real estate broker Douglas Elliman published data according to which the cost of renting an apartment in the Manhattan area of New York on average jumped by 29% in annual terms in June and amounted to a record $5058 per month. So all we have to do is wait.
Why rent not buy
The market is also heated by the fact that, since fewer Americans can afford to buy a house, they are forced to rent housing. Another factor analysts call the widespread use of the remote method of work which means employees need a room isolated from other household, and studios for this are an ideal option. An office and housing in same bottle. Finally, the demand for rental housing is fueled by thousands of Latin American migrants, whom the Joe Biden administration generously let into the States this summer.
At the same time, there is no physical shortage of housing in the United States; on the contrary, after the end of the pandemic, the number of apartments or houses ready for sale shows rapid growth: 1.6 million housing units were put on the market last year. This is significantly more than 900 thousand buyers, that is, Americans or Canadians who have reached the age of 21, who entered the market during the same period. Nevertheless, somehow 96% of all available housing offers have been withdrawn today.
When will house prices drop?
According to analysts at Capital Economics, house price growth may then recover to 2.5% by the end of 2024. Long-term mortgage rates, in their opinion, will be held at about 7% for most of next year, and by the end of the year will drop to 5.75%. A year ago, the rates were about 3%. As experts' calculations show, a family with a median income in October spent 28.5% of its income on paying off a mortgage to buy a house at a median price, whereas in May 2020 the share was only 13.3%.
The median cost of homes in the United States is now about $425 000, which is 13% more than a year earlier
Generation of tenants
Analysts see the reason for the rise in housing prices with a sufficient amount of it in the fact that Americans, corrupted by the helicopter money that the government scattered during the pandemic, did not bargain much- easy come, easy go. The free money quickly ran out, but the so-called anchor effect worked: prices, once fixed at a certain level, are very reluctant to go back down even when the factors that led to the initial growth disappear.
Young people who have entered the market have a radically different psychology from their parents and grandfathers when it comes to a roof over their heads. They do not want to get into a mortgage, condemning themselves to 20 years of strict bounders. They want to travel, change jobs and generally lead a lifestyle with the prefix co- like coliving, coworking, etc. If previously a huge part of the clients absorbed the housing market acquired in the property, now these millions of people have flowed into the rental housing market. The rental real estate market was not ready for this generational shift. This is true for both America and Europe.