2023 Housing Market Predictions: Will Home Prices Drop This Year?

Mortgage rates have constantly been declining since the start of 2023. Nonetheless, many economists are still conflicted about whether home prices will also continue to drop throughout 2023.

House For Sale [Photo: Zillow]

According to Rothstein, as 2023 began, housing experts monitor the economy that is constantly being strained by rising inflation, high interest rates, and projected recession. However, there are still signs showing that a housing market correction is coming. This is because mortgage rates are slowly declining, with the rates less than twice of how much they were in 2022.

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Housing Market Predictions for 2023

According to Bizouati-Kennedy, on January 23, Goldman Sachs, an investment banking company, predicted a drop in national home prices by almost 6%. Included in the prediction are bigger home prices drop in the Pacific Coast and Southwest regions. Home prices will also drop, albeit moderately, in the Mid-Atlantic and Midwest. In addition, cities like Austin, Texas; Phoenix, Arizona; San Diego, California; and San Jose, California are expected to experience a drop of more than 25%.

Nonetheless, Goldman Sachs advised that this national drop in home prices must be small enough to avoid mortgage credit stress. Goldman Sachs also revised its 2023 prediction for the 30-year fixed mortgage rate by announcing that it will stand at 6.5% by the end of 2023. U.S. News & World Report says that the current economy does not indicate a housing market crash. However, some factors could lead to it. These factors include increasing unemployment, continuing housing shortage, and declining overall demand.

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