Here’s What 2023 Holds for Home Sales, Mortgage Rates & Rents, According to NAR; Plus the Top 10 Real Estate Markets to Watch

12/28/2022 CUToday

WASHINGTON–The National Association of Realtors has released its forecast for home sales in 2023, including identifying the top real estate markets it said deserve to be watched, where rates are headed and what will happen with rents.

Lawrence Yun, the NAR’s chief economist and senior vice president of research, is forecasting  4.78 million existing homes will be sold, that prices will remain stable, and that Atlanta will be the top real estate market to watch in 2023 and beyond. Yun offered his forecast during NAR's fourth annual year-end Real Estate Forecast Summit.

Yun is predicting home sales will decline by 6.8% compared to 2022 (5.13 million) and the median home price will reach $385,800 – an increase of just 0.3% from this year ($384,500).

Some Gains, Some Declines

"Half of the country may experience small price gains, while the other half may see slight price declines," Yun said. "However, markets in California may be the exception, with San Francisco, for example, likely to register price drops of 10–15%."

Additional Predictions

• Yun is expecting rent prices to rise 5% in 2023, following a 7% increase in 2022.
• Yun said he expects foreclosure rates will remain at historically low levels in 2023, comprising less than 1% of all mortgages
• Yun is forecasting U.S. GDP will grow by 1.3%, roughly half the typical historical pace of 2.5%.
• After eclipsing 7% in late 2022, he expects the 30-year fixed mortgage rate to settle at 5.7% as the Fed slows the pace of rate hikes to control inflation.  Yun added this is lower than the pre-pandemic historical rate of 8%.

Top 10 Real Estate Markets to Watch

Separately, the NAR has identified 10 real estate markets that it expects to outperform other metro areas in 2023.

In order, the markets are as follows:

• Atlanta-Sandy Springs-Marietta, Georgia
• Raleigh, N.C.
• Dallas-Fort Worth-Arlington, Texas
• Fayetteville-Springdale-Rogers, Arkansas-Missouri
• Greenville-Anderson-Mauldin, South Carolina
• Charleston-North Charleston, South Carolina
• Huntsville, Ala.
• Jacksonville, Fla.
• San Antonio-New Braunfels, Texas
• Knoxville, Tenn.

"The demand for housing continues to outpace supply," Yun said. "The economic conditions in place in the top 10 U.S. markets, all of which are located in the South, provide the support for home prices to climb by at least 5% in 2023."

The Formula

The NAR said it selected the top 10 real estate markets to watch in 2023 based on how they compared to the national average on the following economic indicators: 1) better housing affordability; 2) greater numbers of renters who can afford to buy a median-priced home; 3) stronger job growth; 4) faster growth of information industry jobs; 5) higher shares of the information industry in the respective local GDPs; 6) migration gains; 7) shares of workers teleworking; 8) faster population growth; 9) faster growth of active housing inventory; and 10) smaller housing shortages.