2023 Housing Forecast

After being overwhelmed in the housing frenzy of the recent past, homeowners, sellers, buyers, and renters may be underwhelmed in 2023. The slowdown in home sales transactions that began as mortgage rates surged in 2022 is expected to continue, leading to a moderation in home price growth and tipping housing market balance away from sellers. But with mortgage rates continuing to climb as the Fed navigates the economy to a soft-ish landing, a moderation in home price growth will not be enough for the housing market to be a buyer’s bonanza. Instead, home shoppers will enjoy advantages such as a growing number of homes for sale, but costs will remain high, challenging affordability at a time when overall budgets continue to be squeezed. If home shoppers and sellers have unrealistic expectations, they could find themselves in a stale-mate in the year ahead. The 2023 housing market could become a “nobody’s-market,” not friendly to buyers nor to sellers. Consumers who are ready for the challenge will need up-to-date information on market conditions, creativity and flexibility to adjust, and a healthy dose of patience in order to create success.® 2023 Forecast for Key Housing Indicators

2023® Forecast
2022® Housing Data Expectations
2021 Historical Data
2013-2019 Historical Average
Mortgage Rates 7.4% (avg) 

7.1% (year-end)

5.5% (avg); 7.5% (year-end) 3.0% (avg) 4.0% (avg)
Existing Home Median Price Appreciation (Y/Y) +5.4% +10.2% +17.0% +6.4%
Existing Home Sales (Y/Y | Annual Total) -14.1%
4.53 million
5.28 million
6.12 million
5.27 million
Existing Home For-Sale Inventory (Y/Y) +22.8% +4.0% -19.4% -3.5%
Single-Family Home Housing Starts (Y/Y | Annual) -5.4%
0.9 million
-9.6% Y/Y
1.0 million
1.1 million 0.8 million
Homeownership Rate 65.7% 65.8% 65.5% 64.2%
Rent Growth +6.3% +7.7% +10.0%   +5.0%

Home Sales Retrench Further:

In 2013, the annual tally for existing home sales finally surpassed 5 million after 5 years below that threshold following the unwinding of the housing boom of the mid-2000s. By 2015, existing home sales totaled 5.25 million and in the subsequent four years the annual total fluctuated modestly between 5.25 and 5.51 million homes sales. In 2020, the initial pause in housing market activity in response to the pandemic gave way to an incredibly active off-season, resulting in an annual tally of 5.64 million existing homes sold–above the pre-pandemic range, but still well below the above 6.5 million pace seen in some of the most frenzied months.

With heightened activity continuing into 2021 as mortgage rates hit their all-time low at the start of the year, existing home sales registered their highest level in the prior 15 years, totaling 6.12 million. Expectations were high for home sales in the beginning of 2022 when the mortgage rate remained barely above 3%, but as the year began, investors anticipated that tighter monetary policy would be pursued by the Federal Reserve and mortgage rates began to climb. The Fed Funds rate lifted off of zero in March and moved up faster than any tightening cycle in the last 40 years to its current 3.75% to 4.0% range, with more hikes expected. At their peak in 2022, mortgage rates were up by roughly the same amount since the beginning of 2022, and up more than 440 basis points since their all-time low in early 2021.  While they’ve retreated as markets cheered the recently lower inflation reading, we expect rates to climb somewhat further before their ultimate peak, given how much further the Fed is likely to go before ending the tightening cycle. Thus far, Fed policy makers who have spoken have bolstered our conviction in this call.

With two months of data remaining, we expect existing home sales to total roughly 5.3 million in 2022, a 13.8% decline from 2021.  The deceleration in home sales is likely to continue as high home prices and mortgage rates limit the pool of eligible home buyers. We anticipate that existing home sales will decline another 14.1% in 2023, registering an annual total of 4.5 million, their lowest since 2012 (4.66 million).

Growth Softens, but Prices Continue to Advance:

The major question on the minds of homeowners and aspiring buyers alike is what will happen to home prices. In the second quarter, the value of owner-occupied household real estate was a record-high $41.2 trillion or an average $489,185 for each of the 84.2 million households who own their primary homes. Put another way, every 1% change in the price of homes is a swing of more than $400 billion dollars. Record-high real estate wealth is in large part due to the more than decade-long increase in the price of homes which are expected to notch double-digit gains for a second year in 2022. Soaring prices were propelled by all-time low mortgage rates which are a thing of the past. As a result, home price growth is expected to continue slowing, dipping  below its pre-pandemic average to 5.4% for 2023, as a whole. As higher mortgage rates cut into homebuyer purchasing power, the monthly cost of financing the typical for-sale home will average more than $2,430 in 2023. This would be a nearly 28% increase over the mortgage payment in 2022, and roughly double the typical payment for buyers in 2021.

For-Sale Inventory is Expected to Increase:

In October 2022, the total inventory of homes for sale increased by 0.5% compared to the previous year. Excluding listings that were in various stages of the selling process but not yet sold (pending listings), however, the inventory of active listings had grown by 33.5% compared to the previous year, as homes spent almost one week longer on the market than the same time in 2021. As mortgage rates are expected to remain elevated through to the end of 2022 and into 2023, we expect slower market conditions to persist and we expect inventory levels to continue to grow gradually as the turnover of homes slows. Our forecast predicts total inventory to grow by 4.0% in 2022 overall, and by 22.8% in 2023. Given the roller-coaster ride inventory has been on lately, it’s important to keep historical context in mind. The level of inventory in 2023 is expected to fall roughly 15% short of the 2019 average. In fact October 2022 was the first time that inventory climbed back to its 2020 level for the same time of year.

A wildcard for inventory growth is seller sentiment and activity. In fall 2022, seller sentiment declined as price growth expectations decreased and soaring mortgage rates reduced options for seller-buyers. Newly listed homes were down 15.9% compared to the previous year at the end of October. If seller activity re-ignites as prices are expected to continue to grow (albeit at a much slower pace), inventory could rise further beyond current expectations. Despite short-run headwinds from below-average buyer demand, builders have not kept pace with household formation, which means that the market began 2022 with a revised 5.5 million cumulative housing unit shortfall, an estimate that expanded further in 2022 to 5.8 million units, as builders pulled back on construction. One potential positive for buyers is that the slower expected pace of sales will mean that the housing market doesn’t have to be at 2019 supply levels to feel more balanced. This should give buyers a bit more negotiating room, a phenomenon we saw starting to play out already in late summer 2022 with sellers more likely to accept buyer friendly concessions and sell for below asking price (31%).

Rent Growth is Expected to Continue:

After 13 months of double-digit increases, year-over-year rent growth slowed to a single-digit pace in the late summer of 2022. Nevertheless, the cooling off does not mean the rental market will return to what was typical before the pandemic within the short term, especially when taking the high inflation rate and the strong labor market into consideration.  Since the second half of 2021, the national quarterly rental vacancy rate has been hovering near historic-low territory, in which only 5.6% to 6.0% of rental housing units are vacant compared to over 6% historically. It is the first time since 1985 that the rental vacancy rate has stabilized at such a low level for five quarters in a row. Although rental vacancy ticked up to 6.0% in the most recent data, U.S. renters will continue to face challenges from limited supply and excess demand in the coming year that will keep upward pressure on rent growth. At a national level, we forecast rent growth of 6.3% in the next 12 months, somewhat ahead of home price growth and historical rent trends.

Specifically, rental demand may be stronger in urban areas within big metros, a departure from both recent trends and what is expected in the for-sale market. Unlike the recent trend of renting in the suburbs to take advantage of remote work to lower housing costs, the premium on urban rentals has shrunk sufficiently to draw people back to big cities to enjoy their diverse social and cultural offerings. In addition, rising housing costs, stemming from a twenty-year high mortgage rate and slowing new construction, may keep many potential homebuyers in the rental market longer and thus fuel the already high rental demand. In fact, among recent renters surveyed, only a third (32.3%) indicated that they are considering buying a home within the next 12 months. One silver lining for renters is that despite slowing single-family construction, builders have generally ramped up the construction of multi-family units that are typically rental homes. This is expected to gradually create extra supply for renters, helping to eventually put long-term low vacancy rates in the rearview mirror.

Affordability Makes or Breaks Home Searching in 2023

Incomes, mortgage rates, and home prices–the three major components that determine whether housing is affordable–may feel like the three fates for home shoppers. The combined impact of this triumvirate on affordability will make or break hopeful homebuyer plans in 2023. And while the analogy holds to a large extent–buyers largely have to accept prevailing wages, mortgage rates, and prices which may not be enough to measure up–successful shoppers in 2023 will continue to capitalize on trends that have materialized in 2022 that have enabled home shoppers to take back some control over their destiny. Here are some of the ways this will affect home shopping and the real estate landscape.

  • The Search for Affordability Keeps Cross-Market Shopping Elevated
    As noted above, we anticipate fewer home sales and fewer moves in 2023. Sales will be down not only from 2021’s elevated level, but also may be the lowest in a decade as still high home prices and mortgage rates keep the cost of purchasing high. For households pursuing a home purchase in 2023, affordability will outweigh many other search criteria and is expected to continue to propel shoppers to look elsewhere to find it. Already in 2021, cross-market demand, the phrase we use to describe someone who is shopping for a home somewhere other than where they are currently, accounted for a majority of U.S. metro-based page views. This was up from the near-steady trend that prevailed before the pandemic as workplace flexibility soared. In 2022, even though many workers are returning to offices, cross-market shopping has climbed to new heights, accounting for nearly 61% of page views in the third quarter. Our second quarter study offers a revealing explanation for the trend, especially among shoppers in the Northeast and West. More than 7 in 10 cross-market shoppers from these regions were looking at homes in areas 10% or more cheaper than their current location. Relocating may not be an option for all home shoppers, but for those with the flexibility, 2023 may be a time to explore.
  • Cross-Market Interest Benefits Affordable Areas Flattening Home Prices Nationwide
    Remote work and soaring costs are expected to keep the search for affordability alive and well, propelling home price growth in smaller, affordable markets and tapping the brakes on home price growth in some of the most expensive metros. This will reduce the price premium on homes in some of the highest cost areas and give a boost to prices on homes in lower-cost markets, flattening the difference between them after several years of moving in the opposite direction.  This trend will be especially pronounced if companies expand operations in smaller markets leading to higher local wages that can support higher home prices.
  • Markets Tightest at Entry-Level, but Luxury Real Estate Weathers Higher Rates
    We often talk about the housing market as a single entity, but in reality, shoppers are actually contending with conditions that may differ from the national trends depending on features such as location or price tier. Drilling into the data for homes at different prices shows that while at the median, the price of listed properties exceeds the price of homes that shoppers are viewing by a record-high dollar amount, this isn’t unique to 2022. Comparing the number of views a listed home gets is one indicator of how much demand exceeds supply, and by this measure, 2022 has lagged behind 2020 and 2021 while faring better than 2018 and 2019 across most of the home price spectrum. What’s most interesting is that no matter the year, the $20,000 price band to see the greatest views per listed property relative to other price tiers is just below $200,000: $170,000 to $190,000, but for-sale homes in this price category are rarer than they used to be, comprising just over 2% of all listed homes in October 2022 compared with more than 4% in October 2019. On the flip side, views per property to million dollar listings, priced at $1.1 million and higher, typically see lower engagement. However, in 2022 views per property in this top-tier price range were 90% of the overall average 2022, compared with 72-83% in 2019 to 2021. In 2018, when mortgage rates also climbed, shopper engagement with higher-priced listings was similarly elevated (93% in 2018).
  • Explore all Options to Get the Best Rate & Understand What it Means for You
    With mortgage rates and home prices both high, exploring options to find the best rate will be important for home shoppers in 2023. Data show that with budgets pushed to the limits, an increasing number of home shoppers are looking to adjustable rate mortgages, which are still offering relatively larger upfront savings as a result of the gap or spread between a typical 30-year fixed rate mortgage (FRM) and the typical 5/1 adjustable rate mortgage (ARM). The spread exceeded 1 percent at the end of March for the first time since 2017, and it has averaged 1.15% since then. Taking out an ARM instead of a FRM to finance 80% of today’s typical home list price saves nearly $225 per month or nearly $13,400 over the first 5 years. Put another way, today’s ARM rates are roughly the equivalent of early September’s fixed rates and help put a noticeable dent in the cost of buying a home. Test this out using today’s rates and home prices in the mortgage calculator.
    However, shoppers should be sure to understand the terms before choosing one of these mortgages. To make the decision, consider the pros and cons of an ARM. Look not only at the initial monthly payment, but also review the terms that explain how your rate is capped and what the maximum monthly payment could be. You won’t find these terms in an online calculator because they vary from loan to loan, but they are important for considering how affordable the payment will be for you over the life of your loan. Lenders are required to disclose this information, and shoppers thinking about taking on an adjustable rate mortgage should compare these amounts when shopping.

Key Wildcards:

  • Geopolitics & Global Trade The past few years have offered several stark reminders of how unexpected events can upend projections for what’s ahead. Russia’s invasion of Ukraine has exposed cracks in the geopolitical system, and raised risks of additional instability. The war has caused incredible suffering and loss of life alongside the destruction of physical capital and renewed disruption of global supply chains, contributing to inflation in the near term via the cost of energy. Additionally, the combined impact of pandemic and conflict-driven shut-downs could cause businesses to reassess the costs and benefits of international supply networks.
  • Mortgage Rates Mortgage rates were a homebuyer’s friend in 2020 and 2021, taking the sting out of rising home prices by keeping monthly payments low. In 2022 home shoppers experienced the reverse. Every increase in home prices was experienced more sharply as borrowing costs also climbed. Looking ahead, our expectation is that mortgage rates will continue to remain high in 2023 as economic growth slows, but does not falter and inflation begins to decline, but remains above target. In general, consumers have a similar outlook, and this factors into our forecast for continued slowing in home sales activity.  However, mortgage rates are a major factor in the calculus of housing affordability, and lower than expected rates are a positive risk factor.


Housing Perspectives:

What will the market be like for homebuyers, especially first-time homebuyers?

There will be some things for buyers to look forward to in 2023. There will be more homes for sale, homes will likely take longer to sell, and buyers will not face the extreme competition that was commonplace over the past few years. However, affordability challenges prevent 2023 from being a major buyer’s market, especially for first-time homebuyers who already faced significant obstacles.  In the year ending in June 2022 first-timers made up the smallest share of homebuyers on record, just 26% of all home sales, according to the National Association of Realtors®.  The year ahead is not likely to get any easier for first-time buyers when rising rents and ongoing inflation are eating into savings rates. In fact, among recent renters surveyed who are not planning to buy a home within the next 12 months, nearly half (44.4%) said it was because they did not have enough savings for a down payment.

Interestingly, despite the market headwinds, homeownership rates increased from one year ago overall and for all racial and ethnic groups. This is consistent with our prior research showing that younger generations of Asian Americanblack, and Hispanic homebuyers have been more active in the housing market in recent periods, seeing greater growth in home purchases than their counterparts.

How can homebuyers prepare? 

While it won’t be easy, homebuyers can tackle the 2023 housing market by being prepared. Use online calculators to figure out how much home you can afford. Look for experiences that seamlessly integrate affordability into the home search, like’s Buying Power Tool, to keep your journey focused. While time on market is expected to slow amid fewer home sales in the year ahead, well-priced homes in highly desirable markets may still sell quickly. This means buyers shouldn’t feel undue pressure to move quickly, but should consider acting with haste when a home that meets needs and fits in the budget hits the market.

What will the market be like for home sellers?

Home sellers should know that fewer buyers are expected to be shopping for a home in 2023, as high home prices and mortgage rates cause some would-be buyers to delay purchase plans. As a result, sellers can expect more competition from other for-sale listings, longer sale timelines, and more negotiation with buyers. Already, October housing data show that more than 1 in 5 home listings had a price reduction in the month, nearly double what was typical at this time of year in 2020 and 2021, and just below what was typical at this time in 2018, when mortgage rates were then at the highest level in 7 years.

How can sellers prepare?

While market conditions that are tipped somewhat less in favor of sellers may be causing some hesitation among owners contemplating a sale–new listings have been notably lower than they were one year ago for the last 4 months–sellers can have success in this market as long as they approach with reasonable expectations that are very different from what was the norm less than a year ago.  Even in August 2022, our data show that home sellers were making more buyer-friendly concessions than they had 6-12 months ago. Examples include, accepting contingencies such as for appraisal, financing, and home inspection, making repairs, paying for buyer closing costs, or being flexible on the timing of closing. Of note, recent sellers more often reported making repairs before listing and were also more likely to make or pay for repairs during the contract period. In short, buyer budgets are stretched to the max and sellers who understand this and help buyers get a move-in ready home will have an edge. Each real estate market is unique and some are hotter or cooler than the national trends. Watch for’s hot market insights badge to identify markets that are relatively seller friendly, and work with a real estate agent who can help you put these trends in context for your property.

What will the market be like for renters?

Renters will get to experience all of the pros and cons that come with the flexibility of renting. Vacancy rates have begun to improve from long-time lows, which will help rent growth further moderate. However, rents are expected to set a new high in 2023. For renters ready to think about whether it makes sense to buy, considering the housing market and rental trends over the next year is important. However, the key question that will point to the answer that makes the most sense is how long you plan to live in your next home. In some cases, buying can be a smarter option after as few as 3 years, but generally, buying is a better option after a longer, 5 to 7 year time horizon. The Rent vs. Buy Calculator can estimate the length of tenure needed for buying to make more financial sense than renting and allows renters to customize for location and tax specifications.


Local Market Predictions:

All real estate is local and while the national trends are instructive, what matters most is what’s expected in your local market.

Metro 2023 Sales Growth % y/y 2023 Price Growth % y/y
Akron, Ohio -0.8% 3.8%
Albany-Schenectady-Troy, N.Y. 3.0% 4.7%
Albuquerque, N.M. -3.0% 5.3%
Allentown-Bethlehem-Easton, Pa.-N.J. 1.9% 4.7%
Atlanta-Sandy Springs-Roswell, Ga. -0.3% 4.7%
Augusta-Richmond County, Ga.-S.C. 6.2% 5.7%
Austin-Round Rock, Texas -6.6% 3.0%
Bakersfield, Calif. -7.5% 2.0%
Baltimore-Columbia-Towson, Md. 4.9% 5.5%
Baton Rouge, La. -5.1% 7.1%
Birmingham-Hoover, Ala. -0.4% 7.3%
Boise City, Idaho -10.9% 8.7%
Boston-Cambridge-Newton, Mass.-N.H. -0.6% 9.5%
Bridgeport-Stamford-Norwalk, Conn. -6.5% 5.9%
Buffalo-Cheektowaga-Niagara Falls, N.Y. 6.3% 6.0%
Cape Coral-Fort Myers, Fla. -5.9% 0.1%
Charleston-North Charleston, S.C. -1.6% 4.6%
Charlotte-Concord-Gastonia, N.C.-S.C. -0.3% 5.5%
Chattanooga, Tenn.-Ga. 2.9% 8.2%
Chicago-Naperville-Elgin, Ill.-Ind.-Wis. -2.1% 3.1%
Cincinnati, Ohio-Ky.-Ind. 3.0% 6.1%
Cleveland-Elyria, Ohio 2.7% 4.3%
Colorado Springs, Colo. -3.5% 7.0%
Columbia, S.C. 7.7% 3.6%
Columbus, Ohio 4.6% 5.0%
Dallas-Fort Worth-Arlington, Texas 3.1% 2.2%
Dayton-Kettering, Ohio 2.8% 5.6%
Deltona-Daytona Beach-Ormond Beach, Fla. -7.9% 4.8%
Denver-Aurora-Lakewood, Colo. -1.9% 4.2%
Des Moines-West Des Moines, Iowa 4.1% 6.3%
Detroit-Warren-Dearborn, Mich 0.7% 6.2%
Durham-Chapel Hill, N.C. 0.7% 5.9%
El Paso, Texas 8.9% 5.4%
Fresno, Calif. -13.7% 2.2%
Grand Rapids-Wyoming, Mich 1.6% 10.0%
Greensboro-High Point, N.C. 2.2% 6.2%
Greenville-Anderson-Mauldin, S.C. 0.4% 4.9%
Harrisburg-Carlisle, Pa. 4.7% 3.0%
Hartford-West Hartford-East Hartford, Conn. 6.5% 8.5%
Houston-The Woodlands-Sugar Land, Texas 2.9% 4.5%
Indianapolis-Carmel-Anderson, Ind. -1.0% 7.8%
Jacksonville, Fla. -3.0% 4.6%
Kansas City, Mo.-Kan. 1.9% 7.2%
Knoxville, Tenn. -1.0% 7.1%
Lakeland-Winter Haven, Fla. -5.0% 1.6%
Lansing-East Lansing, Mich 3.1% 4.4%
Las Vegas-Henderson-Paradise, Nev. -10.9% 2.3%
Little Rock-North Little Rock-Conway, Ark. 6.2% 4.6%
Los Angeles-Long Beach-Anaheim, Calif. -15.8% 3.2%
Louisville/Jefferson County, Ky.-Ind. 5.2% 8.4%
Madison, Wis. -5.0% 9.0%
McAllen-Edinburg-Mission, Texas -0.5% 4.8%
Memphis, Tenn.-Miss.-Ark. 2.5% 6.9%
Miami-Fort Lauderdale-West Palm Beach, Fla. -2.0% 3.4%
Milwaukee-Waukesha-West Allis, Wis. 0.4% 7.7%
Minneapolis-St. Paul-Bloomington, Minn.-Wis. -0.8% 5.6%
Nashville-Davidson–Murfreesboro–Franklin, Tenn. -3.4% 5.0%
New Haven-Milford, Conn. 0.0% 3.5%
New Orleans-Metairie, La. -0.8% 6.3%
New York-Newark-Jersey City, N.Y.-N.J.-Pa. 1.8% 5.0%
North Port-Sarasota-Bradenton, Fla. -28.7% 3.2%
Ogden-Clearfield, Utah -11.0% 6.4%
Oklahoma City, Okla. 4.2% 2.6%
Omaha-Council Bluffs, Neb.-Iowa 4.7% 4.8%
Orlando-Kissimmee-Sanford, Fla. -8.5% 2.9%
Oxnard-Thousand Oaks-Ventura, Calif. -29.1% 1.7%
Palm Bay-Melbourne-Titusville, Fla. -18.3% 2.8%
Philadelphia-Camden-Wilmington, Pa.-N.J.-Del.-Md. 0.6% 5.7%
Phoenix-Mesa-Scottsdale, Ariz. -18.4% 2.6%
Pittsburgh, Pa. 4.2% 5.4%
Portland-South Portland, Maine -4.6% 10.3%
Portland-Vancouver-Hillsboro, Ore.-Wash. -10.7% 3.9%
Providence-Warwick, R.I.-Mass. -7.0% 9.8%
Raleigh, N.C. -7.3% 5.4%
Richmond, Va. 0.1% 4.8%
Riverside-San Bernardino-Ontario, Calif. -7.2% 1.5%
Rochester, N.Y. 1.3% 5.3%
Sacramento–Roseville–Arden-Arcade, Calif. -12.1% 3.7%
Salt Lake City, Utah -7.6% 5.8%
San Antonio-New Braunfels, Texas 2.5% 4.6%
San Diego-Carlsbad, Calif. -27.3% 3.6%
San Francisco-Oakland-Hayward, Calif. -13.3% 3.3%
San Jose-Sunnyvale-Santa Clara, Calif. -28.8% 2.7%
Scranton–Wilkes-Barre–Hazleton, Pa. 0.0% 5.8%
Seattle-Tacoma-Bellevue, Wash. -10.3% 6.8%
Spokane-Spokane Valley, Wash. -6.1% 9.6%
Springfield, Mass. 0.7% 8.9%
St. Louis, Mo.-Ill. -0.4% 4.6%
Stockton-Lodi, Calif. -8.6% 6.4%
Syracuse, N.Y. 0.9% 6.1%
Tampa-St. Petersburg-Clearwater, Fla. -15.6% 3.9%
Toledo, Ohio 4.2% 6.7%
Tucson, Ariz. -14.7% 4.5%
Tulsa, Okla. 1.8% 4.6%
Urban Honolulu, Hawaii -6.6% 1.9%
Virginia Beach-Norfolk-Newport News, Va.-N.C. 3.9% 5.1%
Washington-Arlington-Alexandria, DC-Va.-Md.-W. Va. -3.5% 5.0%
Wichita, Kan. -4.3% 7.0%
Winston-Salem, N.C. 2.4% 5.8%
Worcester, Mass.-Conn. 2.5% 10.6%

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