Hi there! If you‘re thinking about buying or selling a home in 2023, you‘re probably wondering what to expect in the real estate market this year. As your friendly neighborhood real estate data guide, I‘ve got the scoop on 18 of the most important real estate statistics and trends that can help you make smart decisions. From changing home prices to shifting demographics, this intel has everything you need to navigate the 2023 housing market with confidence.
Let‘s dive in!
Contents
Home Prices and Sales
The housing market saw wild price gains and bidding wars in 2021 and much of 2022. But rising mortgage rates put a dent in affordability last year. As we move into 2023, here are some key indicators showing where home prices and sales are headed:
1. Median Home Price Up 1.5% Annually to $392,000
The median U.S. home price rose 1.5% year-over-year to $392,000 in November 2022, according to the National Association of Realtors (NAR). While still historically high, the rate of price appreciation has slowed after peaking above 20% in 2021. Steady demand combined with very limited supply of homes for sale continues to put upward pressure on prices. But economic uncertainty and higher mortgage rates are contributing to a cooldown.
2. Existing Home Sales Down for 10 Consecutive Months
NAR also reports that existing home sales declined 1.5% in November 2022 compared to October. That marks 10 straight months of slowing sales as higher mortgage rates cut into affordability. Sales are down 34% from January 2022 and sit at the slowest annualized pace since 2010. While demand remains fairly robust, contracted sales suggest we can expect further declines in closed sales in late 2022 and early 2023.
3. Building Permits Down 3.6% Since January 2022
On the supply side, the Census Bureau reports that building permits for new private housing units were 3.6% below January 2022 levels as of November 2022. Permitting fell sharply for single-family homes, down 20% in that timeframe. Tighter lending conditions, construction costs and economic uncertainty have many builders tapping the brakes on new projects. Limited supply continues to constrain potential sales.
4. Home Price Appreciation Forecast to Slow to 5.1% in 2023
The slowing demand and easing price pressure we saw surface in 2022 is expected to continue into 2023. Redfin forecasts that U.S. home prices will rise just 5.1% on average this year. This is down from projected growth of 7.4% for 2022 and actual gains above 15% in 2021. Regional variation in job and population growth will contribute to localized differences. But overall, expect calmer home price appreciation in 2023.
Mortgages and Affordability
Skyrocketing mortgage rates were a defining story for housing in 2022. Let‘s look at how this impacted affordability and the mortgage market.
5. 30-Year Fixed Mortgage Rates Topped 6% in Late 2022
The average 30-year fixed mortgage rate rose above 6% in late 2022 for the first time since 2008, according to Freddie Mac. This is double the rate of 3% or less seen in 2021. Mortgages became much less affordable as a result. Though rates have moderated slightly to start 2023, most forecasts call for rates around 5% to 6% for 30-year loans this year.
6. Monthly Mortgage Payment on Median Home Up 43%
Higher rates have taken a big bite out of affordability. According to Black Knight, the monthly mortgage payment on a median priced home was up 43% in December 2022 compared to a year earlier. This equates to a difference of $800 per month for a buyer of a typical home. Rates are projected to fall slightly in 2023, which should provide some relief. But payments will remain stretched well above 2020-2021 levels.
7. 26% of Homebuyers Were First-Timers
With affordability declining, first-time home buyers accounted for just 26% of home sales in 2022 according to NAR. This is down from 34% in 2021 and reflects that higher prices and rates have made saving for a down payment more difficult, especially for Millennials and Gen Z. The average first-time buyer was 36 years old last year, showing delayed homeownership.
8. All-Cash Sales Hit Record 36% of Home Purchases
On the flip side, all-cash buyers (typically investors or second home purchasers) accounted for 36% of existing home sales in November 2022 according to Redfin. This rate of cash buyers reached the highest level ever as rising rates deterred financing. Groups with substantial savings and home equity have become a larger share of the market in 2022.
9. Housing Inventory Up 9% From January 2022
One bright spot is that more existing homes have been coming onto the market in recent months as supply constraints ease slightly. Active listings rose to 1.22 million units in November 2022, up 9% from the start of 2022, reports NAR. Though still historically low, any inventory increase will provide more options for the ample pool of interested buyers.
Homeownership and Demographics
Understanding the evolving demographics and decisions of buyers and sellers provides key insights into real estate market conditions. Here are some compelling trends among owners and prospective buyers.
10. Homeownership Rate Dipped to 65% in Late 2022
The U.S. homeownership rate declined to 65% in Q3 2022, down from a peak of 68% in 2020, according to Census Bureau data. Rising prices and rates have priced out many prospective first-time homeowners. And surveys show fewer households see homebuying as a wise decision amid economic uncertainty. The homeownership rate is forecast to keep falling slightly in 2023 as renting gains appeal.
11. 91% of Prospective Buyers Delaying Home Purchase
According to an August 2022 survey by Apartment List, 91% of prospective homebuyers had paused their home search due to affordability concerns. Two-thirds cited high prices as their top reason for delay, while 59% pointed to high mortgage rates. Many still desire homeownership, but near-term challenges have put their plans on hold. How long this demand stays sidelined will help shape the market.
12. Hispanics Account for Record 18% of Homeowners
Hispanic homeowners accounted for 18% of U.S. householders in 2021, an all-time high, according to Urban Institute. The Hispanic homeownership rate rose to 51% last year, narrowing the gap relative to the 60% White homeownership rate. This reflects strong demand, but also that Hispanic buyers face above-average affordability challenges.
13. Peak Millennial Home Buying Years Ahead
There are nearly 72 million Millennials, ages 27 to 42 in 2023, representing the largest U.S. adult generation. Their peak home-buying years still lie ahead as more form households and recover financially from the pandemic and recession, presenting massive housing demand. But affordability hurdles may temper their homeownership rate versus older generations.
14. Gen Z Faces Biggest Affordability Challenges
Today‘s 18 to 26 year old Generation Z cohort number 68 million. But surveys show just 26% of older Gen Z (ages 18 to 24) expect to own a home one day, down from 61% of Millennials at similar ages, per Forbes. Coming of age during the housing boom, Gen Z faces the greatest affordability challenges. Their trajectory and preferences will shape the owner-renter mix.
15. 28% of Sellers Didn‘t Buy a Replacement Home
In a telling sign of market uncertainty, an NAR survey found 28% of recent home sellers did not purchase a new home after selling in 2022. Top factors cited were high prices, not finding a suitable replacement, and not needing or wanting to buy again right away. Some are moving in with family or renting until the economy steadies. Their choices impact housing turnover.
Home Design and Renovations
Lastly, let‘s look at how home design priorities and improvement spending are evolving, which can influence real estate decision-making.
16. 61% Say pandemic Changed Home Feature Preferences
According to a Houzz survey, 61% of homeowners say the pandemic changed which home features they desire, with bigger backyards, multi-purpose spaces, and home offices top updated priorities. These shifting needs can compel owners to renovate, sell, or upgrade via new construction to better meet needs post-COVID.
17. Median Renovation Spend was $10,000 in 2021
Homeowners spent a median of $10,000 on home renovations and repairs in 2021, according to HomeAdvisor data. A third of owners completed projects to accommodate remote work or distance learning. Others tackled larger projects with more time at home. Elevated renovation spend is expected to continue in 2023 based on demand seen by contractors.
18. Home Features Ranked Most Worthwhile for Resale
A 2022 Zillow survey asked recent sellers what home upgrades they found most worthwhile for recouping value. The top five features cited were minor kitchen remodels, new roofs, new garage doors, bathroom refreshes, and new windows. These smaller fix-ups can yield 60% to over 100% ROI. They may appeal to sellers looking for resale value.
I hope this overview of 18 impactful real estate statistics for 2023 gives you greater insight into the state of the market and key trends to factor into home-buying or selling decisions this year. Feel free to reach out if you need any clarification or have additional questions! I‘m always happy to dig deeper into the data and share my analysis to help you make informed choices in our dynamic housing market.
