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Home sales activity next year could reach its lowest point since the early 1980s as households buy or sell real estate, with the market retreating, Redfin deputy chief economist Taylor Marr predicted.
Marr estimated that only 32 out of 1,000 households will sell their home in 2023.
Affordability in the housing market is likely to remain a relatively strong constraint next year even if mortgage rates ease, Marr said.
“Mortgage interest rates have risen rapidly this year … about a 50% increase in the monthly payment,” Marr said. “We expect some moderation in rates going into next year. But even after accounting for that and the increased prices overall, affordability is still likely to be a pretty strong constraint.”
Home for sale and open house sign in Voorhees, NJ, November 20, 2022 (FOX Business Team)
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Mortgage rates fell for the fourth time in a row this week according to Freddie Mac. The mortgage securitizer reported Thursday that the 30-year rate fell to 6.33% from 6.49%. A year ago the average rate was 3.1%.
Even if rates fell 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.
In addition, Marr said many sellers have no plans to return to the market anytime soon.
House for sale in Washington, DC (Ting Shen/Xinhua via Getty Images/Getty Images)
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People who either thought about or were selling their homes “decided to wait a few years until rates are much lower and the economic environment is better,” he said.
With affordability challenges, inflation and growing fears of a recession, Redfin predicts that there will already be only 4.3 million home sales. Meanwhile, the real estate brokerage projects will be about 132.5 million households.
“Households have been steadily increasing every decade, but existing home sales have been more volatile and there have been more booms and busts,” Marr said.
An apartment for rent sign is posted in South Pasadena, California on October 19, 2022. (Frederic J. Brown/AFP via Getty Images/Getty Images)
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On the other hand, the rental market is cooling down due to more supply being available from new construction as more renters are being placed.
“This is putting less pressure on rents and therefore inflation as well, which will really come into play in the new year,” he said.
The brokerage estimated that there will be a slight annual decline in rents by the middle of next year “with drops coming much earlier in some metros.”
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