Home Prices: Decline in 2023, Rise in 2024
The housing market has experienced unprecedented growth over the past couple of years, with home prices reaching record highs. However, according to Realtor.com's chief economist, Danielle Hale, there is a shift on the horizon. In a recent interview with Yahoo Finance Live, Hale revealed that home prices are expected to decline by less than 1 percent this year. While this may sound alarming to some, the decline is seen as a temporary setback before a steady climb in prices resumes next year. In this blog post, we will delve into the reasons behind the projected decline and discuss the potential for a rebound in the housing market.
Realtor.com had initially forecasted a 5.4 percent growth in home prices for 2023. However, the site revised its outlook and now predicts a modest 0.6 percent decline, based on a mid-year housing update shared in late June. Hale explains that the weakness in prices is expected to persist for several months. The decline in sales prices has been most noticeable in the Western region, contributing to the national downward trend.
Several factors are contributing to the anticipated decline in home prices. Firstly, the housing market is subject to seasonal fluctuations, with prices typically peaking during the summer months and dropping during the fall and winter. This seasonal pattern has been observed for years and is currently unfolding as expected. Additionally, Hale suggests that existing home sales are projected to reach their lowest point since 2012, with an estimated total of 4.2 million sales this year. This decrease in demand is one of the main drivers behind the price decline.
While the near-term outlook for home prices may seem pessimistic, the forecast for the following year offers a glimmer of hope. Hale predicts a convincing rebound in home prices in 2024, fueled by increased demand in new homes. Although she does not provide specific figures for the rebound, her outlook aligns with a Zillow poll conducted earlier this year. In the poll, economists predicted a slight decline of just under 2 percent in prices for this year, followed by an annual growth rate of 3.5 percent through 2027.
To understand the significance of the projected decline, it's essential to consider the recent surge in home prices. In 2021 and part of 2022, the housing market experienced a rapid increase in prices, with the typical house selling for $436,800 in the first quarter—a remarkable 35 percent increase from the start of the pandemic in 2020. Therefore, the expected decline in 2023 can be seen as a market correction rather than a sign of long-term trouble.
The housing market is a complex and dynamic sector that experiences cycles of growth and correction. While the news of a projected decline in home prices for 2023 may be concerning, it's crucial to view it in the context of recent exceptional price increases. Realtor.com's chief economist, Danielle Hale, predicts a temporary setback in prices before a convincing rebound takes place in 2024. As with any market, the housing sector experiences fluctuations, and it's important for potential buyers and sellers to stay informed and consider long-term trends when making decisions.