Maggie Titus | June 5, 2023
Summer can be an ideal time to buy or sell a house. The weather is more amenable for showings and curb appeal, and many purchasers are eager to claim homes before the school year begins. But before you jump into the summer 2023 housing market, take a moment to read the tea leaves. Will home prices drop? Is an economic slowdown or housing market crash forthcoming? Read on for real estate market predictions from the experts, including expectations about prices, mortgage rates, inventory and more.
They say “What’s past is prologue.” If that’s true, the summer housing market could be shaping up as a better one than expected based on recent real estate indicators.
Nadia Evangelou, senior economist and director of real estate research for the National Association of Realtors, points out that, while home sales dropped by 2 percent in March (the most recent month we have data for), around 34 percent more homes were sold in March than February.
“This increase is actually larger than the pre-pandemic historical average growth of 33 percent that typically occurs between February and March,” Evangelou says. “While we have a long way to go to get back to the pre-pandemic level of home sales, the housing market is making progress.”
However, Evangelou adds, market fluctuations should persist in the coming months. “Home sales are greatly affected by mortgage rates, since a lower or higher rate has a direct impact on your monthly mortgage payment,” she says. “But so long as inflation continues to ease, the overall trend for mortgage rates should continue downward.”
Of course, some markets are hotter than others. Selma Hepp, chief economist for CoreLogic, is encouraged by some of the latest data. “February home prices showed a first monthly increase after seven months of declines, suggesting that home prices may have bottomed out in some markets,” she says. “Renewed pressure on home prices arose amid continually tight inventories and a declining number of new listings coming on the market, which were down 50 percent below 2022 levels in March and April of this year.”
Meanwhile, mortgage rates remain stubbornly high. Rates began inching back up in April after declining for most of March; as of late April, the average rate for a 30-year loan stood at 6.48 percent.
“Nevertheless, given the continued imbalance between pent-up demand and scarce housing supply, market competition is picking up and a higher share of homes are again selling over the asking price,” Hepp says.
Evangelou foresees a more robust summer selling season. “Home sales activity will likely increase by 5 percentage points compared to the first three months of the year,” she predicts. “But even with this increase, activity will remain lower than a year ago. With inflation slowing down further in the following months, the average rate on a 30-year fixed mortgage will probably hover in the low 6 percent range. Housing inventory will remain tight this summer.”
Bankrate’s chief financial analyst, Greg McBride, CFA, offers a slightly more conservative take.
If the economy and the job market hang in there, we’ll see some pickup in housing activity but no material changes.— GREG MCBRIDE, BANKRATE CHIEF FINANCIAL ANALYST
“Home prices are high, mortgage rates are high and inventory is still quite low,” McBride says. “If the economy and the job market hang in there, we’ll see some pickup in housing activity but no material changes to the price, rate and supply fundamentals.”
Hepp believes 30-year fixed mortgage rates will remain closer to 6.5 percent this summer, which will likely keep the housing shortage from improving. “Inventory of existing homes will stay extremely low until we see a more substantial decline in mortgage rates,” she says. “We have not seen the traditional uptick in new listings from existing homeowners, so undersupply of housing will continue to heighten market competition and put pressure on prices in most regions. Some markets are already heating up considerably, but price premiums that we saw last spring and summer are unlikely.”
Amid all this uncertainty, you may be wondering: When will the housing market crash? Luckily, a crash is highly unlikely, this summer or anytime soon. The current market conditions are quite different from those of 15 years ago, when the housing sector plummeted. Guardrails have been implemented since then that have resulted in more responsible lending and borrowing.
“Everything we are seeing right now in the housing market is more of a correction than a crash,” says Scott Krinsky, a partner in the residential banking department with New York City law firm Romer Debbas. “Lender underwriting guidelines have continued to remain diligent and strict, and unemployment rates are still relatively low.”
Although the chances of a housing crash are low, experts still monitor certain indicators. Warning signs that could signal a potential crash include:
Fortunately, homeowners today are not defaulting on their loans at nearly the rate they did many years ago. Nevertheless, foreclosure filings in the first quarter of 2023 increased 6 percent over the previous quarter and 22 percent year-over-year, according to a recent report from ATTOM.
“We are seeing an upward trend in foreclosure activity,” ATTOM CEO Rob Barber said in a statement. The increase can be attributed in large part to foreclosure filings finally making their way through the system after two years of pandemic-related government interventions — in other words, the numbers are slowly returning to normal, pre-pandemic conditions. “However, with many homeowners still having significant home equity, that may help in keeping increased levels of foreclosure activity at bay,” Barber said.
Who is likely to purchase homes this summer? You can get some clues by examining demographics tracked by the National Association of Realtors last year.
|Homebuyer generation||% of 2021 buyers||Median age in group|
|Gen Z: 22 years and younger||2||18|
|Younger Gen Y/Millennials: 23 to 31 years||18||28|
|Older Gen Y/Millennials: 32 to 41 years||25||36|
|Gen X: 42 to 56 years||22||49|
|Younger Boomers: 57 to 66 years||17||62|
|Older Boomers: 67 to 75 years||12||70|
|Silent Generation: 76 to 96 years||4||79|
You’ve got questions and we can’t wait to answer them.