New year will offer buyers less competition for a growing number of for-sale homes.

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 the housing market balance away from sellers. Additionally, moderation in home price growth will not be enough for the housing market to be a buyer’s market. Instead, homebuyers 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 constrained. Homebuyers looking for affordability in 2023 will find that prices aren't coming down, according to the Realtor.com 2023 Housing Forecast. With the housing market beginning a gradual adjustment that could last through 2025, what next year will offer buyers is less competition for a growing number of for-sale homes. Compared to the wild ride of the past two years, 2023 will be a slower-paced housing market, which means drastic shifts like price declines may not happen as quickly as some have anticipated.

“It will be a challenging year for both buyers and sellers, but an important one in setting the stage for home sales to return to a sustainable pace over the next two to three years," said Danielle Hale, Chief Economist for Realtor.com. "With mortgage rates continuing to climb as the Fed navigates the economy to a “soft-ish” landing, higher costs will lead to fewer closings, but that doesn't mean homebuying will stop entirely in 2023. Americans who are determined to make a move will find that staying up-to-date on the market, flexibility, creativity and a healthy dose of patience will go a long way toward success in the year ahead." Some of the projections include:

• Average mortgage rates of 7.4%, with early 2023 hikes followed by a slight retreat to 7.1% by year-end.

• Home sales prices won't come down, but growth will moderate to a single-digit yearly pace (+5.4%) for the first time since 2020.
• Rents (+6.3% year-over-year) will outpace home prices and likely hit new highs, further adding to budget pressures – especially for first-time buyers.

Source: MReport