Housing is one of those assets that gets more valuable over time. In general, home prices go up, even when the market slows down for a while. For example, data from the U.S. Bureau of Labor shows that, after adjusting for inflation, home prices rose by 4.23 percent annually in the five and a half decades leading up to 2022.
But in 2022, the U.S. housing market was facing some tough economic challenges, including rising interest rates, high inflation, and the possibility of a recession.
By December of that year, the 30-year fixed-rate mortgage had finally dropped below 6 percent after going above 7 percent in September.
The housing market can be very different from one year to the next. So even though past results don’t necessarily predict what will happen in the future, we thought this would be a good time to explore some trends and predictions for the next five years: 2023 to 2026.
Predictions for the Next Five Years Bodes Well.
Heading into 2023, the real estate market looks promising, with demand continuing to outpace supply. This is according to the National Association of Realtors (NAR), who predict that this trend will continue for the next five years. However, there are different perspectives on what the future holds for the housing market. Let’s take a look.
The 2022 Housing Market Landscape
According to Realtor.com, home prices are set to increase between the end of 2022 and the end of 2023, contrary to the NAR’s prediction of a 2.5 percent increase. This is due to a perfect storm of rising mortgage rates, sellers waiting on the sidelines to list their homes until market conditions improve, and buyers not being able to afford the same home they could afford a year ago.
The 2023 Housing Market Predictions
It's no secret that the housing market has taken a hit in recent months. However, there are some predictions that things may start to look up in the next few years. Zillow predicts that home values will rise by 1.3 percent in the next 12 months ending September 2023. They also warn that based on the pace of pending home sales activity and mortgage applications, there are “significant downside risks to home sale volumes into 2023”.
CoreLogic Chief Economist Selma Happ suggests that thanks to a combination of depleting housing inventory, easing mortgage rates, and improved economic data, real estate values could stabilize in 2023.
Housing Market Predictions 2024
According to a Zillow survey, the real estate market may revisit pre-pandemic levels in 2024 and first-time home buyers will likely reclaim market share in 2024. We also see that Capital Economics, a world research firm, expects housing prices to increase by 3 percent by the end of 2024. These predictions offer some hope for the future of the housing market.
It's no surprise that housing prices are projected to fall in the next year. However, Goldman Sachs predicts that the market will reach its bottom at the end of 2023 and prices will level out by 2024. This should give buyers a bit more leverage. Additionally, a Zillow poll suggests that housing inventories will strengthen by 12 percent in 2025, which would give buyers even more power. So, if you're thinking of buying a house in the next few years, it's a good idea to start saving now.
Housing Market Predictions for 2025
As we move into 2025, the housing market is expected to see some changes. According to a Zillow poll, inventories are expected to rise by 12 percent, giving buyers more leverage. Additionally, home prices are expected to rise anywhere from 10.3 to 46.5 percent in the next four years. However, it is worth noting that 8 percent of experts believe that the market will largely favor homebuyers in 2026.
As we can recall the last time the housing market crashed was in the fall of 2008. The crash was caused when the subprime mortgage crisis came to the front and sent the real estate market into a tailspin.
Economist Fred Folvary from Cal State university Actually predicted that dismal crisis and firmly is convinced the housing market is due for a crash every 18 years. Accordingly, if he is to be proved correct, the next housing market crash is expected in 2024.
Regardless, NAR economists predict the price growth in the real estate market will grow anywhere between 15 and 25% over the next 5 years.
We must always caution that in regard to the housing market five years is a lifetime and to determine what the economic and market health will be Is always difficult.
Will the Housing Market Turn into a Buyer’s Market in the Next Five Years?
Many experts in the field say they are already seeing growing signs that the housing market is already turning in to a buyers’ market. Recent polling of real estate agents indicates they believe the sellers’ market that came to the forefront in 2022 is starting to reverse itself in the new year. Agents indicate that the market is already starting to swing towards buyers regarding the prices in the real estate market.
When asked, 25% of brokers characterizes the current market as a “buyers’ market” which is significant because last quarter the number was 10%.
Should I plan on buying in the next 5 years?
We all understand that the real estate market can fluctuate erratically in as little as a year. Consequently, if you plan on buying a house in the next five years you should find the market offers some opportunity. On the other hand, if you believe another housing crisis will unfold in 2024 you should act sooner rather than wait.