Despite the impact of an overinflated market and some decreased demand, home prices are not likely to decrease any time soon, according to a new industry report.
That report, Will Home Prices Drop in 2023—Housing Market Forecast, published by the Laguna Niguel, California-based Norado Real Estate Investments, notes that higher borrowing rates and a cooled-off demand have the potential to impact prices downward.
“Prices drop when demand is met,” says the report, noting that there has been an “excessive demand for houses in several property markets and there simply aren’t enough homes to see to prospective purchasers.”
Although the home price increase has been a real thing for at least the last two years, the report notes that between “the first quarters of 2021 and 2022, all 50 states and the District of Columbia saw an increase in housing prices.”
Market demand and rising home prices were particularly evident during the early Covid 19 months, when realtors saw “hyperactive buyers make offers without seeing the property and forego contingencies to win bidding wars in the highly competitive housing market.”
But by 2022, says the report, the market may have reached a tipping point where “prices have risen so dramatically that buyers are backing off and home sales are slowing down considerably as compared to last year.”
Even so, price increases as of late this spring remained in the double digits in every region of the country, with the South showing the greatest jump over last year at 23.8%.
The next highest increases were recorded in the Mountain states at 22.7%, while the Middle Atlantic states represented the most modest gains at 13.9%.
Five of the states seeing the most dramatic increases were located in the West, with Arizona up by 27.5%, Utah up by 26.8%, and Idaho chalking a 25.5% gain.
Despite the overall national price trend, the report notes that random individual market segments will almost certainly see home price decreases next year with Greenville, Mississippi off by 6%; Minot, North Dakota down by 5.4%; and Fairbanks, Alaska off by 4.6%.
But those places, going into 2023, may well prove exceptional: the market remains heated in part because of the large numbers of the Millennial Generation, those born between 1981 and 1996, who have entered the housing market.
According to statistics compiled by the Norada report, nearly 43% of the Millennials have recently purchased homes, up from 37% in 2021.
That generational infusion is helping to buttress the housing market, says the report, before adding: “The current rate of home price growth is unsustainable, and higher mortgage rates combined with increased inventory will result in slower home price growth, but unlikely any price decline.”
By Garry Boulard
