For the first time in over a decade, residential real estate across the world has entered into a period of falling home prices.
The U.S. housing market is no exception. The streak of 124 consecutive months of positive home price growth, a period spanning from the bottom of the previous bust in February 2012 to the top of the Pandemic Housing Boom in June 2022, has been replaced by a new streak: four consecutive months of U.S. home price declines.
Between June and October 2022, U.S. home prices as measured by the Case-Shiller National Home Price Index fell 2.4%. On the one hand, that’s already big enough to count as the second-biggest home price correction of the post-WWII era. On the other, it’s mild compared to the once-in-a-lifetime 26% correction that occurred between 2007 and 2012.
Back in May 2022, Fortune told readers that “something big” was happening in the U.S. housing market as spiked mortgage rates would soon send housing activity plunging. Once again, we would say something big is happening, to describe a U.S. housing market that has clearly slipped into deflation mode.
The question heading forward is just how much of the Pandemic Housing Boom’s historic 41%-plus jump in U.S. home prices—which has slipped to 38% as of October 2022—will get erased?
To get a better idea of what’s coming for national home prices in 2023, Fortune tracked down the latest housing forecasts from 27 of the nation’s leading housing researchers. Of that group, four expect U.S. home prices to grow in 2023, while the other 23 believe U.S. home prices have further to fall.
Below we present those 27 home price predictions—they’re ordered from most bullish to most bearish.
Realtor.com: The economics team at Realtor.com predicts that the median price of existing homes will rise 5.4% in 2023 while mortgage rates average 7.4%. "The slowdown in home sales transactions that began as mortgage rates surged in 2022 is expected to continue, leading to a moderation in home price growth and tipping housing market balance away from sellers," write researchers at Realtor.com.
Home.LLC: The firm predicts U.S. home prices to rise 4% in 2023.
CoreLogic: The real-estate data firm predicts that U.S. home prices will rise 2.8% between November 2022 and November 2023. (Here is CoreLogic's latest risk assessment for the nation's 392 largest regional housing markets.)
NAR: The trade group projects that existing home prices are poised to rise 1.2% in 2023 while mortgage rates will average 6.3%.
Freddie Mac: The firm's forecast model has U.S. home prices falling 0.2% in 2023 while mortgage rates average 6.4%. "We expect house prices to decline modestly, but the downside risks are elevated," write Freddie Mac economists.
Mortgage Bankers Association: The firm's latest forecast has U.S. home prices, as measured by the FHFA US House Price Index, falling 0.6% in 2023 and another 1.2% dip in 2024. The group also forecasts average mortgage rates of 5.2% in 2023 and 4.4% in 2024. "Inventories of new homes are increasing at the same time that demand has remained quite weak, and more builders appear to be offering price cuts as well as other concessions to move properties," write researchers at the Mortgage Bankers Association.
Zillow: Economists at the home listing site forecast that U.S. home values will fall 1.1% from November 2022 to November 2023.
Fannie Mae: Economists at the firm predict that U.S. home prices, as measured by the Fannie Mae HPI, will fall 1.5% in 2023 and another 1.4% dip in 2024. Fannie Mae is currently modeling an average 30-year fixed mortgage rate of 6.3% in 2023 and 5.6% in 2024.
Redfin: The firm's baseline forecast predicts that the median U.S. home sales price will fall 4% in 2023. "Prices would fall more if not for a lack of homes for sale: We expect new listings to continue declining through most of next year, keeping total inventory near historic lows and preventing prices from plummeting," writes Redfin.
Amherst: The real estate investment firm, which owns a massive portfolio of single-family homes, tells Fortune that its forecast model has U.S. home prices falling 5% between September 2022 and September 2025. “Incomes are the other side of the seesaw from mortgage rates in setting home prices. We saw no middle-income wage gains for decades. Now it’s happening big time. Higher rates are a headwind, but rising incomes are a huge support and tailwind," Sean Dobson, CEO of the Amherst Group, tells Fortune.
Wells Fargo: The bank's forecast model has U.S. home prices falling 5.5% in 2023. "Markets, where home prices shot the highest, are now vulnerable to a disproportionate swing to the downside, notably in previously white-hot markets in the Mountain West which saw an influx of remote workers at the onset of the pandemic. Home prices in desirable locations with comparatively tighter supply are likely to hold up much better," write Wells Fargo researchers.
Capital Economics: Peak to trough, the firm's forecast model has U.S. home prices falling 8%.
Goldman Sachs: The investment bank expects U.S. home prices to decline between 5% to 10% from top to bottom—with its official forecast model predicting a 7.6% decline. “There are risks that housing markets could decline more than the model suggests,” write researchers at Goldman Sachs.
ING: Peak to trough, the Dutch bank tells Fortune it expects U.S. home prices to fall between 5% to 10%. However, the multinational lender says U.S. home prices could possibly decline by as much as 20%. "The housing market downturn, triggered by rapid increases in mortgage borrowing costs, continues to cause us significant concern. Prices have risen hugely over the past couple of years as demand vastly outstripped the limited supply of homes, but this process is going into sharp reverse with mortgage applications for home purchases falling by nearly 50% on the 3Q 2020 peak. At the same time there is more supply appearing on the market and the risk we see a steep correction in prices," writes James Knightley, chief international economist at ING.
Bill McBride: McBride, a housing analyst and author of the Calculated Risk blog, expects U.S. house prices to fall by around 10% from the 2022 peak. "Since national house prices increased very quickly during the pandemic—up over 40%—it seems likely that some of the usual stickiness will not apply. I think the most likely scenario now is nominal house prices declining 10% or more from the peak, and real [adjusted for inflation] house prices declining 25% or so over the next five to seven years," writes McBride.
Keller Williams Realty: Ruben Gonzalez, the chief economist at Keller Williams Realty, expects median home prices as tracked by NAR to fall 10% from top to bottom. "I suspect we will see the trough in the first half of [2023]. Perhaps March or April but that is dependent on the path of interest rates which have been quite volatile recently," Gonzalez tells Fortune.
TD Bank: The bank is forecasting that U.S. home prices will fall by around 10% from peak to trough. That includes a 5.7% drop in 2023 and another 2% drop in 2024. "We see home price growth finding firmer footing soon after the start of 2024," Admir Kolaj, an economist at TD Bank, tells Fortune.
Morgan Stanley: The Wall Street bank expects home prices to fall by around 10% between June 2022 and the bottom in 2024. If mortgage rates fall by more than expected, Morgan Stanley researchers say that the peak-to-trough decline will come in closer to 5%. However, if a "deep" recession manifests, Morgan Stanley predicts U.S. home prices could crash 20% from top to bottom, including up to an 8% home price decline in 2023 alone. "The fact that we expect home prices to start falling on an annual basis in March 2023 despite tight inventory reflects how unprecedented this affordability situation is in the U.S. housing market… However, although supply doesn't keep home price growth floored at zero, we do believe it prevents home price declines from becoming too large," writes Morgan Stanley researchers.
Moody's Analytics: The firm expects a peak-to-trough U.S. home price decline of 10%. If a recession were to manifest, Moody's would expect a top-to-bottom home-price drop of 15% to 20%. “Affordability has evaporated and with it housing demand… Prices feel a lot less sticky [right now] than they have historically. It goes back to the fact they ran up so quickly [during the pandemic], and sellers are willing to cut their price here rapidly to try to close a deal," Mark Zandi, chief economist at Moody’s Analytics, tells Fortune. (You can find Moody's latest forecast for 322 markets here.)
Zelman & Associates: Back in the summer, the boutique housing research firm forecasted that U.S. home prices would fall 4% in 2023 and another 5% in 2024. According to the Wall Street Journal, the firm now expects U.S. home prices to fall 12% between the 2022 top and the 2024 bottom.
Zonda Home: Peak-to-trough, the real estate analytics firm tells Fortune that its forecast model foresees U.S. home prices falling 15%.
AEI: Ed Pinto, director of AEI Housing Center, tells Fortune that he expects U.S. home prices to fall 15% to 20% from peak to trough. Pinto expects prices to bottom out in 2023 or 2024.
CoStar: Peak to trough, CoStar CEO Andy Florance expects U.S. home prices will fall by around 20%. "People who think a 10% drop [in home prices] are dreaming… 20% is more comfortable," Florance tells Fortune.
KPMG: The Big Four accounting firm expects U.S. home prices, as measured by the Case-Shiller home price index, to fall 20% between the fourth quarter of 2022 and the fourth quarter of 2023. “It was a pandemic-induced [housing] bubble, which was stoked by work-from-home migration trends: high-wage workers going to lower second-tier middle markets for more space… Once you start the process of prices falling nationally, there is a self-fulfilling momentum to it, because no one wants to catch a falling knife," Diane Swonk, chief economist at KPMG, tells Fortune.
Yieldstreet: By the third quarter of 2023, Yieldstreet expects U.S. home prices to be 20% below its 2022 peak. "Obviously, some markets will be less impacted. Markets that'll be more impacted are the ones where you have a lot of inventory of new homes, like Phoenix, Las Vegas, Dallas, and Boise. These are markets with a lot of construction, with a lot of new homes… Those are the markets that'll be the leaders in terms of how much home prices decline. There will be some markets in the Northeast, which haven't had a lot of new construction, where home prices are expected to fare better in terms of declines," Tejas Joshi, director of single-family residential at Yieldstreet, tells Fortune.
John Burns Real Estate Consulting: Peak to trough, the real estate research firm's revised forecast has U.S. home prices falling 20% to 22%. That forecast is based on the assumption that mortgage rates stay relatively close to 6% through 2023. "Investors accounted for the highest percentage of buyers ever this cycle in many markets. Lion's share of those [investor] buyers are now on the sidelines, with some needing to sell given overleveraged and really was just taking a flyer on home price appreciation continuing to rip higher. Those days are now over, and these sellers don't exhibit the same emotional and behavioral qualities associated with traditional owner-occupiers, which historically keeps home prices somewhat sticky on the downside," Rick Palacios Jr, the firm's director of research, tells Fortune.
