The Q4 2022 Report: An Overview of the 2023 Housing Market Landscape

As the world continues to recover from the impact of the pandemic, it is important to keep an eye on the housing market. The market is poised to become more balanced between buyers and sellers, with mortgage rates softening demand to meet the continued low supply of homes. 

A More Equilibrium Market in 2023:

The past two years have brought about numerous events that have shaped the real estate market differently from pre-pandemic times. As inflation gradually decreases, there is a chance that mortgage rates will begin to drop in the latter half of 2023, potentially reducing demand for housing. Despite the low supply of homes, which is still about 20% lower than pre-pandemic levels, the market is moving closer to balance as demand has also declined.

Key Housing Market Developments 2020 - 2022:

The COVID-19 pandemic prompted shelter-in-place mandates across the country and the world in mid-March 2020, resulting in the temporary shutdown of the real estate market. By May 2020, it became clear that the virus would not dissipate quickly, leading to a housing boom and the advent of ultra-low mortgage rates. The change in consumer behavior and influx of easy money caused a rise in asset prices, including housing, stocks, cryptocurrency, and art. By the end of 2020, the money supply had increased by 24%, and by the end of 2021, it had risen 40%. The low interest rates incentivized buyers to enter the market, and the number of homes for sale in the United States declined by 34%. Home prices increased 9% by the end of 2020, and another 17% by the end of 2021. Inflation rose rapidly, prompting the Federal Reserve to raise interest rates in March 2022, resulting in a final buying frenzy as buyers and sellers raced to secure low rates. The first quarter of 2022 saw a surge in sales, leading to a 5% increase in home prices. Sales began to slow, and by June 2022, home prices had risen 42% since June 2020. However, the increase in interest rates considerably reduced affordability, leading to a cooling of the housing market in the second half of 2022.

2023 Prospects:

Economic indicators suggest that the housing market is moving towards balance. Although the supply of homes remains low, the decrease in demand is bringing the market closer to equilibrium. In 2023, it is anticipated that the return of seasonal trends will take place, characterized by price and inventory growth in the first half of the year, followed by contraction in the latter half, but at a relatively lower level.

Conclusion:

The U.S. housing market has undergone significant changes over the past two years. Despite the obstacles posed by the pandemic, the market is expected to remain relatively balanced in 2023, with the return of seasonal trends, albeit at a lower level. As the world continues to recover, it is imperative to stay informed of the trends shaping the housing market and make informed decisions.