Home Buying is Expected to Slow Down, but Should Pick Up in 2023

Chris Remington
Published Jan 24, 2025


The building of new homes declined slightly in December 2022. High mortgage rates were most likely to blame. This decline in new home construction indicates a slowdown in the housing market in 2023.

With mortgage rates doubling over the past year, home construction and sales appear to have stalled. Yet, the Federal Reserve’s raising of interest rates to calm inflation seems to be working and an overall slowdown in the economy may increase home buying later this year.
 

Inflation and Home Buying in 2023


By the end of last year, the Federal Reserve’s efforts to slow inflation by raising interest rates impacted the housing sector. In December, the sales of existing homes dropped by 1.5%. While the drop was not as severe as anticipated, it did reflect the eleventh straight month of decline.

New home sales also finished off the year with a 0.7% decline. This represented a modest decline but reflected an overall slump in the housing sector.

However, inflation now seems to be settling down, and mortgage rates stand a good chance to decrease in 2023. The early part of this year should still see higher inflation and interest rates. So, a boost to the housing market will take some time to develop.

Economists predict that hidden demand in prospective buyers will take around six months to materialize. Unemployment is expected to rise initially, which will delay buying of homes.

Yet, as the economy slows down, some homeowners will decide to sell while the Federal Reserve eases up on interest rate hikes. The long-term projection then is that home buying will increase.

A real estate and finance professor at the Wharton School, UPenn, has predicted a 5% to 10% decline in housing prices in 2023.

Along with this prediction, the slowdown and recovery in housing are marked by regional variations.
 

U.S. Regions and Home Buying


In 2022, national mortgage rates doubled while housing prices remained the same or increased. In some regions, the situation was particularly difficult for home buyers and sellers.

California is one of the most expensive states in the nation. Surprisingly, home prices in this state decreased slightly compared with 2021. The median sale price for a single-family home was listed at $777,500 in November of 2022, compared with $782,480 in November 2021.

However, with rising interest rates, many potential California buyers still find home buying to be unaffordable. And, some areas within the state saw increases in housing prices. For example, Los Angeles home prices went up in 2022, as did Sonoma and Napa.

For sellers, decreased housing prices have impacted some areas more than others. San Francisco has witnessed declining property values, with the median home price falling 21% in November 2022, compared with the previous year.

While experts predict a minor weakening in the overall housing market in California, some metropolitan areas will be more advertising affected. San Jose, for example, is an area where housing values are expected to fall by 7% or more.

Thus California, like most of the nation, will not witness a housing crash but is expected to see significant declines in major cities.

Other areas like Montana have witnessed a stall in the housing market. In 2021 and 2022, property buying increased in places like Missoula. But then the buying slowed substantially and is anticipated to remain this way for the early part of 2023.

Minnesota witnessed a similar trend from 2021 to 2022. In 2021, housing sales increased to a 20-year high and continued into early 2022. Then, the market cooled by the end of the year, especially in the Minneapolis-St. Paul area.

One of the reasons here is the supply of affordable homes. Even with a decline in home sales, Twin City home prices increased by 6% in 2022. Home construction tends to focus on higher-priced properties.

The overall national slowdown and regional dynamics will impact the housing market for worse and better this year.
 

Home Buying and Selling in 2023


Because the economy and housing market are uncertain and in a transition phase, home buying will likely decrease for at least part of 2023. Home prices are expected to remain about the same, or increase slightly, which could delay first-time home buyers.

Yet, in some areas, housing prices are expected to fall, and that decline could lead to more home sales. The San Francisco market, for example, is anticipated to see a 10% to 15% drop in prices.

In some locations, a buyer’s market may emerge in 2023. To learn more about the housing market in 2023, visit FreshGigsClub. For home buyers, waiting a few months into this year would be a good starting point.

Related articles

New US Homes May Get Pricier by $11,000 Due to Trump's Trade Policies...

Buying a brand-new house in the United States could soon hit your wallet harder. Builders say that because of trade policies introduced by President Donald Trump, the average cost to construct a new ho...

How Will HUD Changes Impact Seniors in the U.S.?...

In America, the number of older adults is on the rise, with about 55.8 million people, or one out of six, being 65 or older as of 2020. A recent study from the Urban Institute has shone a light on how budget cuts to the...

Rockford City Council Boosts Rental Assistance Program with Additional $10,000 to Support Families in Crisis...

In Rockford, Illinois, the city council and township have decided to give more money to a helpful program that's been around for 30 years. This program is al...

What Are Fannie Mae and Freddie Mac? A Big Change in Home Loans...

Fannie Mae and Freddie Mac are two big companies that help make buying homes more affordable and predictable in America. They are important because they buy home loans from banks and then sell them to invest...

Homeownership Slipping Away for Young Americans...

Many Americans who don't already own a home feel that becoming a homeowner is becoming an impossible goal. According to a recent survey from Northwestern Mutual, over half of these non-homeowners (53%) believe that owni...

Funding Delay Halts Eco-Friendly Renovation Project for Affordable Housing...

A big update was planned to make two apartment buildings in Chicago better for the environment and cheaper for elderly people with less money to live in. These buildings would get things like so...