U.S. existing-home prices will remain stable in 2023 despite a second straight annual decline in sales, predicted Lawrence Yun, the chief economist at the National Association of Realtors, in his annual forecast released on Tuesday.
Home prices will tick up 0.3% to $385,8000 next year from an estimated $384,500 this year, Yun said.
“Half the country may experience small price gains, while the other half may see slight price declines,” Yun added.
California may be an exception, with homes in San Francisco, for example, seeing price drops of 10-15%, he said.
The outlook for home prices is one of the biggest unknowns facing the U.S. economy.
This year, the Fed has pushed up its benchmark interest rate by the most since 1980. Rates are expected to rise to a range of 4.25%-4.5% after the central bank’s meeting on Wednesday, up from just above zero in March.
Yun says he expects the 30-year fixed mortgage rate to hit 7% by the end of this year and then settle back down to 5.7% as the Fed slows the pace of rate hikes needed to control inflation.
The housing sector has felt the most pain from the Fed’s rate hikes. Existing home sales have dropped sharply as homes have become less affordable.
Home sales have dropped for nine straight months through October, the latest month for which data is available.
In 2023, home sales are expected to decline by 6.8% to 4.78 million, the NAR said.
Yun said he expects rent prices to rise 5% in 2023, down from a 7% gain this year. Foreclosure rates will remain at historically low levels, comprising less than 1% of all mortgages.
The yield on the 10-year Treasury note
dropped sharply to 3.49% on Tuesday after a softer-than-expected consumer inflation reading for November.