Housing Market Predictions for Mid- to Late-2023

August 1, 2023 - 10 min read

Will home buying get easier?

We’re already in 2023’s second half and that begs an important question for home buyers: How will the housing market fare over the rest of the year?

What kind of home prices and sales can we expect? Where will mortgage rates land? Will the housing supply improve? And what should you do to improve your chances of purchasing between now and December?

We reached out to an array of real estate industry pros for their insights and housing market predictions across the rest of 2023. Read on for their analyses and advice.

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At a glance...

Is the national housing market healthy?

Ask different experts and you will get different opinions about the overall health and state of the country’s real estate market right now. That’s exactly what we did to get a fuller picture of the landscape and try to make sense of what borrowers face.

Jack Macdowell, chief investment officer at The Palisades Group

“Housing market health is a matter of perspective and definition. If credit risk is the focus, compared to the 2008 financial crisis the housing market is currently healthy. That’s because homeowners overall have historically high levels of home equity, there are historically low levels of housing debt service obligations relative to disposable income, and delinquencies and foreclosures are near all-time lows.

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And this is against a backdrop of a seemingly unbreakable labor market. But if housing transactions and inventory are the measures, the metrics would indicate an extremely unhealthy market where most geographies are well under-supplied.

This can be seen in broad and localized metrics surrounding the supply of existing home inventory – which currently stands at three months versus a historical average of 5.2 months – 42% below average. And if home values are the measure, that would indicate a fairly neutral market health, given the low levels of inventory that are expected to support values – even with low demand.”

Derek Morgan, chief real estate officer at UnrealEstate.com

“Assessing the health of the national housing market depends on various indicators, such as home prices, mortgage rates, supply and demand balance, and the rate of delinquencies and foreclosures. Based on 2023 assumptions, it seems the market is moving toward a period of more balanced conditions with lower interest rates encouraging more buyers, and sellers preparing to list their properties.

But several aspects could be improved to ensure a healthier housing market. These include affordability, supply-demand balance, labor and material availability, and sustainable lending practices.”

Martin Orefice, CEO at Rent To Own Labs

“No, the housing market is not healthy. Rental rates are still sky high, and it’s practically impossible to find a starter home since they are not profitable to build and most of the available ones have been bought up by investors.

There just aren’t enough chances for new buyers to get in on the market’s ground floor anymore. Condos and townhomes can fill this void to some extent, but they are limited by low turnover and new construction tending toward rentals.”

What will drive market demand for homes in the second half of 2023?

Can we expect buyer interest to surge in the months ahead? If so, what conditions will add fuel to that fire? Here’s what the experts had to say.

Dennis Shirshikov, strategist at Awning.com and professor of economics and finance at City University of New York

“A few big drivers will fuel market demand for homes in late 2023. First, we are witnessing an interesting demographic shift with more millennials reaching the prime age for first-time homeownership. These folks have been a bit slow to enter the market, what with economic conditions and all.

But as they begin to settle down and start families, their demand for homes is going to be a huge factor. The other thing is remote work – it’s a real game changer. Now that people are not tied to an office, they are looking at homes in different locations, and that’s influencing demand in markets that were previously overlooked.”

Kobi Lahav, senior managing director/director of sales at Living New York

“High rents will continue to push people to purchase, as they feel rents are not sustainable. In addition, an increase in housing inventory and probably at least one last interest rate hike this year should send prices down – a move that will attract more buyers into the market.”

Mike Hardy, managing partner at Churchill Mortgage

“There are four things that drive market demand and play into property values. Existing supply and future supply, current and increasing demand for new buyers, the current credit market and availability of credit, and affordability. We currently have a significant affordability challenge.

Despite that, there are simply not enough homes to meet the demand of cash buyers and purchasers who can afford rates in the 6% to 7% range. As inflation is contained, it will cause mortgage rates to drop, and that will add another layer of buyers. If mortgage rates come down by 1 percentage point, that creates roughly 5 million more people who will be able to afford purchasing who cannot afford it today.”

Home price predictions for the second half of 2023

One of the biggest questions we get from readers is: When will home prices go down? For answers, we reached out to those in the know.

Rebecca Hidalgo Rains, CEO at Integrity All Star Realty and managing broker at Berkshire Hathaway Home Services

“Home prices nationally will see a 5% increase this year. In some places, housing prices are already up. In my home state of Arizona, home prices have increased by 9%. Interest rates will be the biggest driver in home prices this year.

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Lower interest rates will increase buyer competition for homes, which will send home values up. Inventory is also a factor, with some markets having very high demand but low inventory. High demand with low supply equates to an increased cost of housing.”

Rick Sharga, president/CEO at CJ Patrick Company

“Nationally, I expect home prices to fall over the course of the year, but only marginally. Local conditions will vary dramatically. Prices in coastal California, the Pacific Northwest, and certain markets where prices rose too high too quickly – like Boise, Phoenix, and Austin – may see double-digit price declines, especially at the high end of the market.

Meanwhile, areas where there is job growth and population growth – like Florida, the Carolinas, Tennessee, and other parts of Texas – are likely to continue to see home price appreciation, albeit at much more rational rates, like 3% to 4%. But continued strong demand and a very limited supply should prevent any major price crash. And with foreclosure rates still at only 60% of pre-pandemic levels, there are virtually no distressed properties to drive values down, either.”

Al Lord, founder/CEO at Lexerd Capital Management

“Prices for existing homes are expected to increase marginally by 1%, while prices for new homes are anticipated to go up by 2.5%. Affordability concerns and interest rate prices will be contributing factors to drive home prices over the next six months.”

Home inventory forecasts for the second half of 2023

The law of supply and demand continues to dominate the real estate market in 2023. So when will inventory levels improve? Here’s what our panel had to say.

Jason Gelios, realtor at Community Choice Realty

“2023 housing inventory will see a slight uptick over the next few months, although it will still remain below the averages of years past. The current level of housing inventory is what’s keeping a major fall in housing prices at bay.

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If we see a jump in available housing on the market, we will see an increase in the number of first-time buyers entering the market – especially those who did not have the opportunity to purchase a home in the recent hyperactive market – as well as baby boomers looking to not only downsize but also upsize to allow room for adult children and multi-generational living.”

Rebecca Hidalgo Rains, CEO at Integrity All Star Realty and managing broker at Berkshire Hathaway Home Services

“Builders are trying to play catch-up by adding more homes where they can. Home builders are excited to get back into the saddle. COVID supply chain issues disrupted contractors, so they are looking to build more like normal.

However, as long as there are homeowners with mortgages at fixed rates of 2% to 3% who don’t want to sell, we are going to have a problem with inventory. Supply will increase over the rest of 2023, but it won’t match increased demand. Cost of goods will also affect inventory – if inflation keeps the cost of goods high, we will see builders priced out of constructing more homes.”

Mortgage rate predictions for the second half of 2023

No housing market forecast would be complete without a deeper dive into predicted mortgage rates. Our market gurus offered a wide range of prognostications.

Peter C. Earle, economist at American Institute for Economic Research

“I predict that the 30-year fixed-rate mortgage will hit 7.50%, on average, between now and December 2023. I also expect the 15-year fixed-rate mortgage will average 6.90% between now and the end of 2023.”

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Dennis Shirshikov, strategist at Awning.com and professor of economics and finance at City University of New York

“I expect mortgage rates to go up by the end of 2023. For the 30-year fixed rate, I anticipate something like 7.75%, and for the 15-year fixed rate, I’d anticipate in the range of 6.75%.”

Martin Orefice, CEO at Rent To Own Labs

“Mortgage rates continue to be dictated largely by the Federal Reserve. Now that they have indicated a reluctance to raise rates further in the months ahead, the race is on to see how low lenders are willing to go to get borrowers in the door. I’m forecasting the average 30-year fixed-rate mortgage rate to be 6.75% over the next six months versus 6.15%, on average, for the 15-year fixed-rate mortgage.”

Overall housing market forecast for the second half of 2023

What does the near future hold for the national real estate market? We asked our pros for a big-picture view of the entire landscape.

Boyd Rudy, team leader/associate broker at MiReloTeam powered by KW Professionals

“The housing market’s strength in the second half of 2023 will depend on various factors, including economic conditions, interest rates, inventory levels, and buyer demand. If the economy continues to recover and job growth remains steady, there might be increased demand for housing, favoring sellers. However, if interest rates rise significantly or there is a substantial increase in housing inventory, the market might favor buyers more.”

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Mike Hardy, managing partner at Churchill Mortgage

“The real estate market will be stronger for sellers in the second half of 2023. There is a wave of new buyers coming into the marketplace and not enough inventory available for the current and upcoming high demand. There is a wave of millennials in their early 30s who will need housing, and the market is just beginning to feel the impact of it.”

Derek Morgan, chief real estate officer at UnrealEstate.com

“Given the expected shift toward more accommodating monetary policy resulting in potentially lower interest rates, the housing market in the latter half of this year is forecasted to lean toward a buyer’s market. This scenario is anticipated due to prospective buyers being attracted by more affordable mortgage loans and sellers holding off listings until these favorable conditions attract more purchasers. The backlog of sellers and an influx of buyers could intensify the buyer’s market heading into 2024.”

Jack Macdowell, chief investment officer at The Palisades Group

“The second half of 2023 may result in a wide range of outcomes among various US housing markets, where supply, demand, labor market, climate, and demographic trends will dictate relative housing activity. Would-be buyers are coming to terms with higher interest rates, lower affordability, limited supply, and the realization that housing costs will need to make up a larger portion of their disposable income. This backdrop portends an environment that is not optimal for either buyers or sellers.

Sellers and many property markets will find fewer buyers competing for their homes, likely encounter situations where would-be buyers drop out due to tight credit conditions and lower affordability, and find their home is competing with new home inventory as builders seek to capitalize on low inventory levels. Buyers, on the other hand, will find fewer homes available for sale and limited options in desirable areas in school districts.”

Best advice for home buyers

All the aforementioned can be a lot to digest. Indeed, prospective home buyers need to carefully weigh the pros and cons of acting soon versus postponing their decision to buy. For help with this choice, our insiders offer the following recommendations.

Rick Sharga, president/CEO at CJ Patrick Company

“Save as much as possible for a down payment to help minimize monthly mortgage costs. And for buyers hoping for the kind of market crash that the doom-and-gloomers on YouTube are predicting, don’t waste your time waiting. It’s much more likely that waiting longer is simply going to result in paying even more for the home you’re looking at today.”

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Jack Macdowell, chief investment officer at The Palisades Group

“The best advice would be to purchase only if you intend to stay in the home for five or more years, only buy that which you can reasonably afford, and ensure that you have sufficient reserves and residual income for unplanned expenses or a temporary job loss. Once all those boxes are checked, aim to marry the house and date the rate – meaning purchase the right home knowing that you can always refinance into a lower mortgage rate down the road.”

Derek Morgan, chief real estate officer at UnrealEstate.com

“Keep an eye on the market. If it’s trending toward a buyer’s market due to anticipated lower interest rates, waiting may be beneficial. Conversely, if it appears to be a sellers’ market with increasing prices, acting sooner could be advantageous.

Consider the long-term value of the purchase. If it’s for investment, think about dollar-cost averaging and building a portfolio. If it’s a dream home, bear in mind that opportunities come and go. If buying a home now is essential, but there is an expectation that rates might drop, remember that refinancing is always an option in the future.”

Boyd Rudy, team leader/associate broker at MiReloTeam powered by KW Professionals

“Home shopper candidates should closely monitor market trends, interest rates, and economic indicators. It’s essential to get pre-approved for a mortgage well ahead of time, work with experienced real estate agents, and be prepared for competitive bidding situations in what is primarily a seller’s market.”

The bottom line

The housing market can be a tricky thing to figure out — especially if you’re thinking about buying property.

For-sale supply, price movements, and mortgage rate fluctuations all play major roles in determining affordability. Hearing what industry experts have to say can provide a helpful roadmap to landing a good deal.

If you’re ready to begin your homeownership journey, reach out to a local mortgage professional today.

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Erik J. Martin
Authored By: Erik J. Martin
The Mortgage Reports contributor
Erik J. Martin has written on real estate, business, tech and other topics for Reader's Digest, AARP The Magazine, and The Chicago Tribune.
Paul Centopani
Reviewed By: Paul Centopani
The Mortgage Reports Editor
Paul Centopani is a writer and editor who started covering the lending and housing markets in 2018. Previous to joining The Mortgage Reports, he was a reporter for National Mortgage News. Paul grew up in Connecticut, graduated from Binghamton University and now lives in Chicago after a decade in New York and the D.C. area.