The real estate market is cooling, slowing and decelerating. Those are just a few of the verbs that have been used to describe the U.S. housing market in recent weeks.
And for the most part, it’s true. A slew of reports published over the past couple of months have shown signs of a cooling trend. We can see this in sales activity, home-price trends, and other metrics.
This ongoing shift in market temperature has a lot of would-be buyers wondering: Should I buy a home in the fall or winter of 2022, or wait until 2023?
Home Price Predictions Are a Mixed Bag
Slowing home-price growth is a major concern for many home buyers in the U.S. And rightly so. While prices continue to climb in most parts of the country, the rate of acceleration has slowed. And economists predict that some local housing markets could see a dip in prices over the next two years.
So it’s a valid and timely question: Buy a home now, or wait until 2023?
Real estate market predictions are challenging in the best of times, and nearly impossible in times of unprecedented market activity. Even so, a number of housing analysts and researchers believe that home prices could cool considerably through 2022 and into 2023.
Researchers from Moody’s Analytics, for example, recently shared their predictions for home prices in major cities across the U.S. They estimated how house values are likely to change during the two-year period from Q4 2022 – Q4 2024, in 414 major U.S. housing markets.
The results were a mixed bag. The company sees home prices falling in some parts of the U.S., while continuing upward in others. As Lance Lambert from Fortune reported:
“Among the nation’s 414 largest housing markets, the Moody’s Analytics forecast model predicts that 210 markets are poised to see house prices decline over the coming two years; 204 markets are poised to see house prices rise over the coming two years.”
The group sees the biggest two-year price declines happening in Florida housing markets like The Villages (-12.8%), Punta Gorda (-11.4%), Cape Coral (-9.4%), Ocala (-9.3%) and Fort Lauderdale (-8.6%). Some of these markets experienced a surge in home-building activity over the past couple of years. So they could end up with too much supply, relative to demand, as we enter 2023.
Outside of the Sunshine State, home prices were also expected to decline in housing markets like Spokane, Washington; Reno, Nevada; and Missoula, Montana. To name a few.
In many other U.S. real estate markets, Moody’s analysts predict that home prices will continue rising over the next couple of years, but probably at a slower pace.
Buy a Home Now, or Wait Until 2023?
Which brings us back to the question at hand: Would it be better to buy a house now, or wait until 2023?
This will partly depend on (A) where you plan to buy and (B) your long-term plans.
If you think you’ll be in the home for a long time, price fluctuations over the next couple of years shouldn’t concern you much. Aside from the Great Recession of 2007 – 2009, home values in the U.S. tend to rise over time. Many experts agree that real estate is still one of the best investments, long term.
But if you only plan to be in the home for a few years — or an even shorter “flipping” scenario — you’ll want to tread carefully. As mentioned above, there’s a good chance home prices could decline in some U.S. cities over the next year or two.
The research team at Redfin recently offered some downturn predictions similar to those issued by Moody’s Analytics (cited above). According to Redfin’s analysis, “migration destination” cities in Sunbelt States like California, Arizona and Florida are the most at risk of falling home prices.
Experts Agree: The Housing Market Is Cooling
While it’s hard to predict future real estate trends, there’s no doubt the housing market is downshifting from the frenzied pace of last year. This trend could continue through 2022 and into 2023, giving home buyers more leverage in the market.
Jeff Tucker, senior economist at Zillow, recently said that a reduction in buyer demand is “cooling the market and pushing it toward the rebalancing it needs.”
Bankrate’s Greg McBride echoed this sentiment, stating: “Selling prices will level out as the market cools but this cooling is just a return to the type of balanced market that has been absent the past couple of years.”
Those are just two voices in a growing chorus singing the same tune: After more than 18 months of overheated activity, the U.S. real estate market is finally starting to cool down.
Disclaimer: This story contains housing-related predictions and projections that are the equivalent of an educated guess. The Home Buying Institute makes no claims or assertions about future real estate trends.