Real Estate Sales Expected to Drop as Prices Remain High

According to the National Association of Realtors, the real estate market is expected to experience fewer sales and higher prices through 2023. While search volume for "real estate market" has increased, the predicted 13% drop in home sales for 2022 and an 11% increase in price are a cause for concern.

The predictions for 2023 are not much better, with no change in the number of homes sold but a 2% increase in price. In July 2022, sales of existing homes fell nearly 6% compared to the previous month, marking the sixth consecutive month that sales decreased. Home sales in July were more than 20% lower than one year ago.

Fannie Mae predicted 4.57 million existing homes would sell in 2022 and 4.55 million will sell in 2023. However, we are seeing trends shift regarding the price of homes too. From June to July 2022, housing prices nationwide dropped slightly by 0.77%, the largest monthly decline in home prices since January 2011.

Major metro areas are seeing a more substantial drop in prices. Home prices in San Francisco dropped by 2.8% in July, and in Austin, prices dropped 2.7%. July data shows a drop in home values in several metro areas that have become famous for a lack of affordable housing in recent years.

Despite the slight decline, home values are still up 16% over 2021, and experts say a significant drop in home prices is not going to happen. The battle between supply and demand is expected to continue, and when inventory catches up to demand, real estate industry experts say that home prices will stabilize, not decrease. A panel of housing market experts says that won’t even happen until 2024.

At the beginning of 2022, the 30-year fixed-rate mortgage rate was 3.22%. At the end of July, it was 5.30%. Black Knight, a financial services company, reports that home affordability is at its worst since the mid-1980s. As of June 2022, the company’s data shows that it takes more than 36% of the median household income in the US to pay the mortgage on an average-priced home.

Impact of High Home Prices and Low Sales on the Real Estate Market

The real estate market is being significantly impacted by high home prices and low sales. These trends are the result of a supply and demand imbalance, where there are more people interested in buying homes than there are homes for sale. This situation drives up home prices, making it increasingly difficult for potential buyers to afford a home.

The pandemic has also played a role in the current state of the real estate market. Many homeowners have chosen not to sell their homes, given the uncertainty surrounding the pandemic. This has led to a significant decrease in available homes, further fueling the supply and demand imbalance.

The impact of high home prices and low sales on the real estate market is far-reaching. It affects both buyers and sellers, as well as the broader economy. For buyers, it means a more competitive market, where they may have to offer more money to secure a home. For sellers, it means that they can ask for more money for their homes, but it also means that their pool of potential buyers is smaller.

The broader economy is also affected by the real estate market. High home prices and low sales mean that fewer people are buying homes, which in turn means less money is being spent on home-related goods and services. This can have a ripple effect on the economy, as it reduces demand for home-related goods and services and can result in job losses in the construction and real estate industries.