Home sales activity next year could hit the lowest point since the early 1980s as households buying or selling real estate pull back from the market, Redfin’s deputy chief economist Taylor Marr predicts.
Marr estimates that only 32 out of 1,000 households will sell their home in 2023.
Housing affordability is likely to “remain a fairly strong constraint”[ads1]; next year even if mortgage rates fall, Marr said.
“Mortgage rates have risen rapidly this year … increasing the monthly payment by about 50%,” Marr said. “We expect some moderation in prices for next year. But even after taking that into account and the high prices overall, affordability is likely to remain a fairly strong constraint.”
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Mortgage rates fell for the fourth consecutive week this week, according to Freddie Mac. The mortgage securitizer reported Thursday that the 30-year yield fell to 6.33% from 6.49%. A year ago, the average rate was 3.1%.
Even if rates fall below 6% or 5.8% by the end of the year, based on Redfin’s current projections, rates would still be at their highest level since 2008.
On top of that, Marr said many sellers have no plans to return to the market anytime soon.
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People who were either thinking about or selling their homes “decided they were going to wait a couple of years until prices are much lower and the economic environment is better,” he said.
With affordability challenges, inflation and growing fears of a recession, Redfin estimates there will only be 4.3 million existing home sales. Meanwhile, the real estate projects there will be around 132.5 million households.
“Households have consistently grown every decade, but existing home sales are more volatile and have had more of a boom and bust,” Marr said.
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On the other hand, the rental market has cooled due to more supply becoming available from new builds as more tenants stay.
“This puts less pressure on rents and therefore inflation, which will really take shape in the New Year,” he added.
The brokerage estimated that rents will see a small annual decline in the middle of next year “with declines coming much faster in some metros.”
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