Will home prices drop in July 2023? Here’s what the experts say
A dearth of houses for sale to meet demand from would-be homebuyers has kept prices elevated. Here’s what the experts forecast for the market in July.
Home prices are barely lower than where they were last year with the median US home-sale price just $4,000 lower than the June 2022 peak according to Redfin data. That represents a 0.9 percent decrease year-over-year and the smallest decline in four months. A typical home in the United States is selling for $383,000.
The main culprit is high mortgage rates, which are more than double their historic lows at the end of 2021. Through the month of June the weekly average for a 30-year fixed-rate mortgage hovered around 6.7 percent according to Freddie Mac data. This has created a situation where millions of homeowners who locked in rates around 3 percent, and many more under 5 percent, feel trapped by those low rates and the high price of switching to a new home.
Thus they are not selling, and sufficient new completions have yet to come onto the market which is creating a dearth of supply while demand remains, albeit less than what would be expected, that there are more buyers than sellers. Those that are able to close a deal are paying list price on average helping to sustain the higher values. So what do the experts foresee for July and beyond?
Will home prices drop in July of 2023? Here’s what the experts say
Would-be homebuyers that are hoping for a break in high home prices shouldn’t hold their breath. The current situation isn’t expected to change much through the end of the year. “Home prices won’t drop in 2023. I expect pricing to be relatively flat,” Nadia Evangelou, senior economist and director of real estate research for the National Association of Realtors (NAR) told Bankrate.
High interest rates, helping to keep mortgage rates elevated, are not expected to go away soon and could go higher when the Fed meets this month. Policymakers have been working to bring down inflation, which is cooling but not fast enough. The primary driver in their eyes is the labor market which has proven itself to be resilient aided by Americans continuing to spend in spite of rising costs.
Evangelou laid out three scenarios for Fed interest rates dependent on inflation going forward. In one, continued high inflation prompts the US central bank to keep raising rates which could send mortgage rates possibly as high as 8.5 percent.
In the second, the Consumer Price Index begins to come down more consistently in response to the Fed’s year-plus-long ratcheting up of rates, and mortgage rates settle in at between 7 percent and 7.5 percent. While the third, policymakers keep jacking rates and the economy goes into a downturn, with the resulting recession pushing mortgage rates to 5 percent according to NAR senior economist.