State of the US housing market

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The US housing market in 2023 is characterized by high mortgage rates, elevated home prices, and constrained housing inventory, which together are perpetuating a housing affordability crisis. The national average 30-year fixed mortgage rate reached a 2023 high of 7.23% in mid-August and stood at 7.19% as of September 21. Despite these high rates and prices, the market remains competitive due to demand levels surpassing the ongoing inventory crunch and homeowners who locked in low interest rates staying put1. Home prices are beginning to slowly decline, but the housing affordability crisis is likely to continue due to a meager housing supply and persistently high mortgage rates. The median existing-home sales price slid to $406,700 from $410,200 between June and July, but increased 1.9% from a year ago1. Despite some areas seeing price declines, the likelihood of a housing market crash—a rapid drop in unsustainably high home prices due to waning demand—still remains low. Experts point out that today’s homeowners stand on much more secure footing than those coming out of the 2008 financial crisis, with many borrowers having positive equity in their homes1. In the next five years, the US housing market is predicted to experience a slowdown, with prices either flat or experiencing a modest decline. According to a report by Zillow, home values are projected to increase by 5.5% over the next year, slower than the 16.9% increase seen in 2021. Zillow predicts that home values will increase by 3.5% in 2023, 3.4% in 2024, 3.3% in 2025, and 3.2% in 20263. Housing supply remains at near historic lows, especially for entry-level homes, which is sustaining higher home prices. However, new single-family homes have been somewhat alleviating this issue, attracting buyers frustrated by the limited resale inventory. The median new home sales price in the U.S., which dipped to a 2023 low of $417,200 in April, has since been on the rise amid persistent demand. In July, the median sales price for a new home leaped to $436,7001. Despite the challenging conditions, most experts do not expect a housing market crash in 2023 since many homeowners have built up significant equity in their homes1. The issue is primarily an affordability crisis, with high prices and mortgage rates making it difficult for many potential buyers to enter the market. However, some experts predict a shift in favor of buyers in 2023, with 56% of panelists predicting a buyer's market in 2023, and another 24% predicting that the housing market shift would come in 20243.
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