As 2022 draws to a close, analysts have dusted off their crystal balls and are making forecasts for next year. A recent poll from Zillow asked property experts what they expect for the US real estate market in 2023. The results indicate a year of slower price rises, a calmer scenario for buyers and rental prices ahead of inflation.
Prices in the US real estate market in 2023
The burning question for buyers is, of course, by how much more will house prices continue to rise? The latest Zillow Home Price Expectations Survey reveals that all experts forecast a deceleration during 2023.
The most significant drops will happen in areas that have experienced the most substantial growth over the last two and a half years. They include Austin, Boise and Raleigh.
On the other hand, inexpensive markets in the Midwest – Indianapolis and Minneapolis, for example – are not forecast to see lower prices. Nor are fast-growing areas in the South, such as Atlanta and Nashville or suburban districts in the main metros.
Buyer's or seller's market in 2023?
Sellers have reigned supreme in the US real estate market since summer 2020. However, analysts believe 2023 will see a shift in tendency and buyers will move into the picture instead.
56% of the Zillow survey respondents believe the market will move “significantly” in buyers' favour "at some point next year". Around a quarter expect this shift to happen in 2024, while 13% believe it will happen in 2025.
In some markets, the change has already taken place as rising interest rates start to take their toll on buyers’ budgets. Florida real estate market is a case in point.
Still a busy market
However, despite the projected shift in trend, buyers are still not out of the woods. Transactions continue to take place much more quickly than in 2019. The current rate is 11 days shorter than in 2019, although the typical time listings spend on the market is slowing down.
Buyers also face obstacles at supply levels. Although inventory is rising, it remains over 40% lower than it was pre-pandemic. In short, the US real estate market continues to be a busy one.
Rental rates in 2023
The analysts also provided their forecasts for the US rental market next year. In 2022, monthly rates have skyrocketed and registered their highest ever in June. They have since levelled out, but show no signs of dropping significantly.
According to the Zillow survey, rent growth will continue to outpace the rate of inflation in 2023 “as priced-out potential home buyers exert additional pressure on the rental market”.
The experts expect 5.4% rent growth during 2023, considerably below the 8.6% uptick forecast for the whole of 2022. Nevertheless, the increase is higher than prior to the pandemic when rental rates went up at around 4% a year. As a result, the US real estate market in 2023 will remain attractive to buy-to-let investors, particularly in the most sought-after areas.