Housing Market

The US Housing Market Predictions for the Next Six Months

us house values

Low-interest rates, stagnant supply, and liberal fiscal policies fueled something of a housing price bubble in the two years following the coronavirus epidemic in 2020.

Although property prices continue to rise year-over-year, the price rise is not as significant as they were at the beginning of last year. House prices have decreased continuously for the past six months.

US House Prices Declining Since Mid-2022

Based on house sale price statistics from Redfin, the US home price rise was in the double digits every month from August 2020 through mid-July 2022.

But since mid-2022, prices on the property market have been falling nationally. While year-on-year house prices are higher, prices have declined every month since the summer of 2022. Moreover, the year-on-year price increase was small in January 2023 at just 1.5 percent.

For the first time, the national median selling price exceeded $400,000. The average property sold for close to $2 million in Silicon Valley and San Francisco.

According to CoreLogic’s house price index, these ten metropolitan regions saw the biggest decline in prices between June and August 2022:

• Boise, ID: -4.3%
• Logan, UT: -4.4%
• Boulder, CO: -4.5%
• Idaho Falls, ID: -4.9%
• San Francisco, CA: -5.4%
• San Rafael, CA: -6.2%
• Coeur d’Alene, ID: -7.3%
• Oakland, CA: -7.6%
• Seattle, WA: -8.2%
• San Jose, CA: -9.4%

As you can see, the list is dominated by areas on the West Coast. There are many reasons for the general house price decrease in the US.

Reasons for a Decline in US House Prices

Mortgage rates are nominally independent of the federal fund’s target interest rate. But the rates frequently rise or fall as a result of the Federal Reserve’s decisions.

The Federal Reserve has engaged in its most aggressive program of monetary tightening since the 1980s, hiking interest rates from almost zero to around 4.5 percent last year to rein in spiraling inflation.

As a result, mortgage rates rose to multi-year highs, slowing down demand for property.

In October and November 2022, the average interest rate on a 30-year fixed-rate mortgage exceeded 7%. Although the rates decreased by over 6% in January 2023, they remain high given that they were just about 3% at the beginning of 2022.

Moreover, a 15-year fixed-rate mortgage now costs, on average, 6.28 percent more than it did in January 2022 (2.43 percent).

In the past, higher rates haven’t necessarily resulted in declining property values. The rapid increase in interest rates in 2022, however, may potentially cause a further decline in housing values in 2023.

According to Goldman Sachs, the five US cities most likely to have price losses that are more than 10% steeper than their peaks are Austin, San Diego, San Francisco, Denver, and Phoenix.

The reduction in home prices is also being driven by the decline in home sales in the US. The overall number of house sales fell in December 2022 for the eleventh time in a row. Additionally, Fannie Mae anticipates a 21.3 percent decline in house sales by December 2023.

According to the National Association of Realtors, sales of previously owned houses decreased 7.7 percent in November to 4.09 million units annually. In other words, existing houses are selling at the slowest rate seen in the previous ten years.

What Experts Say About House Market Prices in 2023

Economists, mortgage companies, banks, and real estate companies are divided on whether the exceptionally tight U.S. housing market will loosen up in 2023.

According to predictions from Goldman Sachs and Wells Fargo, the market will fall by 7.5 percent and 5.5 percent, respectively. Companies involved in real estate are pessimistic.

The housing market in the United States is expected to decrease by as much as 20% between 2022 and 2023, according to the accounting company KPMG LLP.

Amherst, a real estate investment company, forecasted a 5% decrease, while Redfin forecast a 4% decline.

The National Association of Home Builders (NAHB) and Freddie Mac anticipate a 0.2 percent, or as high as 15 percent, decline in home price increase.

On the other hand, the National Association of Realtors predicts a 1.2 percent gain, the Mortgage Bankers Association a 0.7 percent increase, and Home LLC a 4 percent growth in the housing market.

Supply Constraints Will Likely Prevent Further Drop in House Prices

US Home2

Trends in home prices also rely on how well supply matches the demand.

The ongoing inventory issue was exacerbated in January by a further decline in the new house building. According to the U.S. Department of Housing and Urban Development and the U.S. Census Bureau preliminary data, the number of single-family construction starts in January decreased by 4.3 percent from December and the number of applications for building permits decreased by 1.8 percent from the previous month.

Before we see a major resurgence in new buildings, there must be additional back-to-back upticks since builder confidence is still low.

What is the main reason that house prices haven’t fallen as much as they did after 2008? because, unlike back then, there isn’t a glut of properties on the market driving down prices.

With foreclosure rates less than one-tenth of those during the housing crash, capital-rich institutions aren’t under as much pressure as they were back then. Additionally, few homeowners are paying more on their mortgage than the value of the home, and debt payment loads are around historic lows.

According to Fannie Mae, serious delinquency rates have dropped by nearly half in the past year, to less than 0.7 percent of mortgages.

Homeowners may easily upgrade or hold onto their present residences due to the lowest unemployment rate in 54 years. If they are among the 85% of owners with mortgage interest rates under 5%, many will choose to stay rather than purchase a more costly property with a more expensive loan.

All of this indicates that there won’t be many properties for sale, which prevents price drops.

The basic line is that there aren’t many scenarios that are likely to result in inventory levels returning to historically typical levels in 2023, which indicates that potential homebuyers will still have to search diligently for a property to purchase.

Homeowners today are likewise in a far better position than those who were recovering from the 2008 housing crisis. a large proportion of borrowers have positive home equity. Still below pre-pandemic levels are foreclosures. According to the U.S. Foreclosure Market Report by ATTOM Data, there were 34% fewer foreclosures in 2022 than there were in 2019.4
As a result, there is little chance that the housing market will implode in the next six months or so in a manner comparable to the housing crisis of 2007.

Buyers who wait to buy today in the hope that prices would drop tomorrow could be let down. Experts advise buying a property based on your wants and budget rather than holding out for substantially cheaper pricing. It’s possible that a house you like in a neighborhood you like that also meets your budget is the one for you.

It won’t matter when you purchase a house if you’re in a position to do so financially because you’ll live there throughout the ups and downs of the economy. However, purchasing real estate at the peak before a recession would carry an extra risk if you’re intending to do it as a short-term investment.


The price of homes for sale kept falling. In regards to how much more home values will decline this year, many analysts are still divided.

Because there is more excess supply on the US west coast than in the denser mid-Atlantic and Midwest areas, house prices might decline more dramatically there.

In part, low inventory problems prevent prices from declining, which prolongs affordability concerns for many, particularly first-time homeowners. However, because of slow sales, which keep properties on the market longer, purchasers also have a greater opportunity of negotiating a price. In certain situations, buyers can discover they can get a house for 10% less than it was originally listed for.

Depending on the region, home prices will rise or fall, with less costly places probably experiencing price rises and more expensive ones seeing falls.