6 Leading real estate economists and pros on what to expect from the housing market this winter

February 6, 2023
Posted in News
February 6, 2023 veps

Some aspiring homebuyers are in for some much-needed relief. “Right now might appear more appealing to some buyers because, recently, the housing market has been cooling. Prices are dropping in many areas, housing supply is rising, sellers are offering more concessions and mortgage rates are falling,” says Jacob Channel, senior economist at LendingTree.

But no doubt, after rapid escalations in home prices and mortgage rates in the past couple years (though both have eased recently), many buyers are wary of what’s to come. So we asked economists and real estate pros for their housing market predictions this winter.

Prediction 1: Mortgage rates will “continue their downward trek”
“With the Fed switching to a smaller rate hike in February, mortgage rates will continue their downward trek and a lower mortgage rate improves affordability, bringing more buyers back to the market,” says Nadia Evangelou, senior economist and director of real estate research at the National Association of Realtors (NAR).

For his part, Channel also says lower rates also might bring at least some buyers back. “There may be more buyer demand assuming rates continue to fall, or at the very least don’t start climbing again, but it doesn’t seem like there’s a high probability that demand will dramatically rise back to where it was at the start of last year. All in all, February’s housing market will likely remain more friendly to buyers than it was just a few months ago,” says Channel.

Kate Wood, home expert at NerdWallet, offers a similar sentiment: “Buyers might be more motivated if rates appear to stabilize and those who were priced out when rates rapidly increased last fall might be willing to give home buying another shot.”

Prediction 2: Home price gains will slow even further
Realtor.com data shows that the growth of median asking prices for homes nationwide eased back into single-digits in December for the first time in 12 months and nearly held that pace moving into January.

“The milestone of single-digit price growth is really a continuation of the moderation that began in the summer when prices were growing at a pace of 18% year over year,” says Danielle Hale, chief economist at Realtor.com. The report reveals that the median price of homes for sale has increased by 8.1% annually in January, which is slightly less than December’s growth rate with the national median list price remaining stable at $400,000 in January, down from a record high of $449,000 in June.

Expect even slower growth this month, says Evangelou. “Home price gains will slow even further in February. Mortgage rates are finally moving down, easing affordability, but many buyers continue to be priced out of the market, especially first time buyers,” says Evangelou.

That said, price changes will vary between markets. “Markets with the biggest imbalance between supply and demand will see greater softness in prices, while for the majority of others it is more a leveling out in prices,” says Greg McBride, chief financial analyst at Bankrate.

Prediction 3: Buyers have more room to negotiate
Hale says: “It won’t be all frustration for buyers. A surging number of homes for sale may not mean falling home prices, but it is enabling buyers to gain back a measure of negotiating power and along with a longer time on market compared to a year ago, buyers are more likely to see homes with a list price that has been lowered below original asking price,” says Hale.

Prediction 4: The market is on a slow path to normalcy
“The housing market is continuing its return back to a more normal-looking market after the pandemic-fueled frenzy. We are far from out of the woods with the affordability crisis that has been weighing heavily on home sales, but we are starting to see some green shoots pushing up as prices and mortgage rates have fallen. That dip in mortgage rates has begun to attract renewed interest from buyers and sales are climbing again compared to last year, but demand remains much lower than the past two years,” says Nicole Bachaud, senior economist at Zillow.

source: marketwatch