The U.S. housing market has been cooling since the summer, with home prices declining cumulatively by 3 percent since the market’s peak in the spring of 2022. This slowdown in home prices is welcomed, especially since the typical home price has risen 42 percent in the past three years, far outpacing wage and consumer price inflation.[0]
The rising cost of purchasing a home and the worry of an economic slowdown pushed many potential buyers out of the market, reducing demand and slowing the pace of existing-home sales.[1] The median existing-home price for all categories dropped to $366,900 by the end of the year.[1]
Mortgage rates have come down since peaking in late October and early November, with the 30-year mortgage rate dropping to 6.09 percent for the week ending February 2, the lowest level since September.[1] This, coupled with a dwindling competition, have enabled buyers to have more leverage in negotiations.
The affordability of housing has been a major issue for buyers. In the fourth quarter of 2022, a family needed a qualifying income of at least $100,000 to afford a 10 percent down payment mortgage in 71 markets, up from 59 in the prior quarter.[2] For a family to afford a home in 16 markets, they needed an income of less than $50,000, which was a decrease from the 17 markets in the previous quarter.[2]
Goldman Sachs economists now predict that the peak-to-trough drop in US housing will be 6 percent, down from the previous 10 percent forecast.[3] The Census Bureau also released its quarterly report on home ownership and occupancy for Q4 2022, stating that the rental housing vacancy rate was 5.8 percent, down from 6.0 percent in Q3 2022.[4]
The housing market is expected to return to more seasonal patterns in 2023, shifting toward sellers in the spring before moving firmly into a buyer’s market by summer.[5] Lower mortgage rates in the coming year will bring some buyers back to the for-sale market, but demand likely won’t rise to levels seen in early 2022.[6] It remains to be seen whether the market will remain cooler after the winter season ends.
0. “U.S. Home Price Insights – February 2023” CoreLogic, 7 Feb. 2023, https://www.corelogic.com/intelligence/u-s-home-price-insights-february-2023/
1. “Will the housing market crash in the US in 2023? Here’s what the experts say” AS USA, 6 Feb. 2023, https://en.as.com/latest_news/will-the-housing-market-crash-in-the-us-in-2023-heres-what-the-experts-say-n/
2. “Home price growth keeps slowing, but new owners still pay more” National Mortgage News, 10 Feb. 2023, https://www.nationalmortgagenews.com/news/home-price-growth-keeps-slowing-but-new-owners-still-pay-more
3. “Goldman Sachs makes a bold housing market call” Fortune, 6 Feb. 2023, https://fortune.com/2023/02/06/housing-market-bold-call-by-goldman-sachs-home-prices-to-bottom-soon-2023/
4. “Census reports on rental vacancies in Q4” Yield PRO magazine, 9 Feb. 2023, https://yieldpro.com/2023/02/census-reports-on-rental-vacancies-in-q4
5. “Salt Lake City No. 1 in market for the biggest increase of homes for sale in 2023 – Utah Business” Utah Business, 7 Feb. 2023, https://www.utahbusiness.com/salt-lake-city-no-1-in-market-biggest-increase-of-homes-for-sale-2023/
6. “Here’s What Housing Experts Anticipate in a Cooling Winter Market” Pro Builder, 7 Feb. 2023, https://www.probuilder.com/heres-what-housing-experts-anticipate-cooling-winter-market