While some experts have warned of an impending US housing crash, Nadia Evangelou, senior economist and director of research at the National Association of Realtors, anticipates the opposite.
Home prices and sales will dip this year, but she anticipates a rebound in 2024 with sales rising and limited supplies sparking price gains.
“It seems that home sales activity has bottomed out, and 2023 will be the turning point for the housing market,” Evangelou told Insider. “We don’t expect any housing crash.”
In fact, some indicators are already turning positive. The NAR’s pending home sales index has ticked higher for two consecutive months and saw its largest monthly increase since June 2020.
To be sure, the Mortgage Bankers Association said mortgage rates are continuing to rise, and a hawkish stance from the Federal Reserve will put more pressure on borrowing costs.
But Evangelou said inflation could soften faster than expected this year, and the US will avoid a recession. That will lead to mortgage rates falling back toward 6% after they topped 7% in October.
The real estate economist said the US continues to suffer from a severe housing shortage, which has persisted for over a decade coming out of the Great Financial Crisis.
“Back in 2008, we had an oversupply of homes by like 4 million, but now we have less than 1 million,” Evangelou said. “And this is the main factor that keeps home prices from falling.”
On the demand side, she said it will stay elevated, helped by the robust labor market. So even though there are relatively few buyers now amid low inventory, housing demand continues to outpace supply, Evangelou said.
While higher interest rate expectations are weighing on homebuying activity, Evangelou anticipates the trend to ease in the latter half of this year.
NAR forecasts that there could be up to an 11% drop in home sales this year. Then in 2024, activity could jump by about 18%, she said.
Similarly, home prices should drop about 2% this year, then rise about 3% to 4% next year, she added. That’s much more upbeat than other forecasts.
Dallas Fed economists said in a recent paper that for the housing market to return to its fundamentals, a 19.5% correction would be necessary.
Meanwhile, industry watchers have said that home prices nationwide will fall 6.1% this year. And next year, cities like Austin, Seattle, Phoenix, and San Francisco could see prices dive by more than 12%, strategists said, given their large increases in inventory.