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The housing market has gone through its share of changes in the past three years. While many reveled in the record-level sales and price appreciation during the pandemic, questions of “crashes” and “busts” were on the minds of others.
The latter hasn’t come to pass, as Zillow experts claim in a newly released report that while challenges are still present, the housing market has largely settled and avoided a price crash. Instead, the report acknowledges that home values have remained resilient as the market has rebalanced in 2023.
While the company initially anticipated a slight price decline at the start of the year, experts have revised their forecasts, predicting a 5.5% price growth by year’s end.
Favorable as that may be, rising prices and surging mortgage rates have not favored buyers. Affordability remains an issue in the market as this year’s mortgage rate increases have doubled the mortgage cost.
The report notes that monthly payments—for a mortgage with a 20% down payment—have risen from $875 in 2019 to just over $1,800 this year. At the same time, experts acknowledged the lock-in effect impacting the market as sellers “continue to sit on the sidelines” if they managed to capitalize on record-low rates that emerged during the height of the pandemic.
- Zillow expects home values to grow by 5.5% in 2023—roughly in line with pre-pandemic rates.
- Existing-home sales are expected to hit 4.2 million this year, their lowest levels since 2010.
- Rent growth posted a monthly increase of 0.6% and a 4.1% increase annually.
- New construction posted a 24% increase in sales year-over-year.
- Zillow surveys indicate that 23% of current homeowners are considering selling their homes in the next three years—up from 15% last year.
“The housing market is stabilizing after the turbulence of the pandemic, but the effects will be with us for a long time,” said Zillow Senior Economist Jeff Tucker. “Price appreciation is back to normal after a short reset, but that means buyers still face serious cost challenges and competition, especially for the most affordable houses and in less expensive markets.”
“There are a few potential bright spots for buyers on the horizon as we head toward the fall,” the report reads. “Competition and price growth are both easing up as they typically do at this time of year, while more normal, predictable growth in rents and home prices will make it easier for those considering new mortgages to budget and plan.”