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Housing market may be heading for tough 2023
Home prices have boomed in metro Atlanta and across the country the past two years, but things are likely to change as we get ready for the new year.
ATLANTA - If you have owned a home in metro Atlanta over the past 24 months, it's likely that the value of that home has jumped around 30%. As amazing as that sounds, home prices continue to exceed inflation, but things are likely to change as we get ready to march into the new year.
The Federal Reserve has promised to raise interest rates again and again until inflation eases significantly, though no one is quite sure when that might be. Economists at Fannie Mae think 2023 will probably be a tough year for the housing industry.
FOX 5 Real Estate Expert John Adams points out that all real estate is local, and what is happening in your neighborhood may not be the same thing that is happening in his neighborhood.
That being said, we also need to recognize that home prices are, in fact, declining in some parts of the US. The word "decline" means prices are actually falling.
One good example is San Francisco, Seattle, and San Diego. In these cities, sellers have had to face lower demand. In each of these cities, prices have declined over the past 6 months.
In contrast, Miami, Tampa, Charlotte, and Atlanta have all seen prices appreciate 4% to 6% just in the past 6 months. That represents a significant deceleration over the past 12 months - meaning prices are still rising, just more slowly than before. Over the past year, the average home in metro Atlanta gained over 22% in value. That rate of appreciation is unsustainable.
Adams believes there are three likely scenarios for 2023:
1. Home prices are likely to actually decline in 2023 in areas of the U.S. where prices are the highest already. In places like California, New York and Oregon, prices may decline as much as 5% to 10% from their all-time highs of earlier this year.
2. Watch for home prices in the Midwest to hold on better because it's affordable, he expects Southern states will fare better because of quality of living, job growth and in-migration.
3. Part of this is being driven by the work-from-home movement, allowing workers to move to lower cost areas from high-cost areas. Other factors include decreased affordability caused by much higher interest rates, and a continuing shortage of available homes for sale. We always get back to supply and demand!
The bottom line is that the United States of America is a huge collection of neighborhoods, and no two of them are exactly alike. Some parts of our country are simply way overpriced already, and in those areas, I expect to see actual lower prices in 2023. Other parts of the US, like Georgia, are already more moderately priced, and are less likely to see a decline.
Adams expects values in metro Atlanta to hold their own or even appreciate in value (a little bit) during 2023.
Other factors to consider:
- Gen-Xers getting married, having babies, buying houses
- Builders are not building nearly enough new homes
- New technologies will encourage more remote work