HUD Articles

Data shows that the housing market may turn around
at the beginning of the new year.
Pending home sales – a leading indicator for home sales
- fell again in October 2022. Nevertheless, contract
signings fell slower than the previous month. While it
takes one to two months for a home sale to complete,
this could mean that we may see more housing activity
in the new year.
In addition, mortgage rates have likely peaked. After
surpassing the 7 percent threshold in the second week
of November, rates are finally moving down as inflation
is cooling. The higher federal funds rates are starting to
tame inflation. Rates are still more than double those of
a year ago, but if inflation continues to slow down, rates
may stabilize below 6 percent. This could bring more
buyers back to the market boosting demand for
housing.
However, housing inventory will remain tight in 2023.
First, the number of housing starts will continue below
the historical average of 1.5 million due to persistent
building material bottlenecks. Single-family
construction will be most impacted. While 2022 is the
first year with a decline of single-family starts since 2011,
single-family construction is forecasted to experience
additional declines in 2023.
Meanwhile, fewer homeowners will sell their homes and
purchase another as mortgage rates are substantially
higher than in 2021. Typically, higher mortgage rates
lead to lower mobility rates over time. Many owners may
be locked into their existing homes as mortgage rates
rise, while the three-percent rates from 2021 may not be
back anytime soon.
Thus, home prices will continue to rise due to limited
supply. This can assure homeowners that they will
continue to build equity from their home purchase.

National Association of REALTORS®
Research Group
LAWRENCE YUN, PhD
Chief Economist & Senior Vice President for Research
JESSICA LAUTZ, Dr. of Real Estate
Deputy Chief Economist & Vice President of Research
NADIA EVANGELOU
Senior Economist & Director of Real Estate Research
MEREDITH DUNN
Research Manager