HOME PRICES SETTLE DOWN

After three years of big increases, expect average prices to be flat in 2023. For buyers and sellers, this market is a mixed bag.

- DANIEL BORTZ

The past three years have been painful for price-conscious consumers, but they've been a boon for homeowners. The median existing-home sale price in December was $366,900, a 38% jump since January 2020, according to the National Association of Realtors.

But annual double-digit home price gainsa hallmark of the pandemic era-are going away, economists say. Home sale prices stalled after mortgage rates spiked in 2022, and some forecasters predict that prices will fall in 2023. Lawrence Yun, chief economist at the NAR, expects the median sale price to stay mainly flat. "Housing affordability has gotten out of hand, and we're going to see price corrections as home supply increases and mortgage rates stabilize," Yun says.

Freddie Mac forecasts a price decline of 0.2%, and Redfin projects the median sale price will drop by roughly 4%. But economists at CoreLogic are more optimistic, predicting that home prices will grow 2.8% from November 2022 to November 2023. And Danielle Hale, Realtor .com's chief economist, foresees median home prices rising 5.4% this year. "We think home prices are going to lose momentum but still go up," she says. "Inventory is going to increase in 2023, but it's still going to trail pre-pandemic levels, so I don't think it's going to be a buyer's bonanza."

As for new construction, the median price of new houses sold in December 2022 was $442,100, up from $430,500 in January 2022. But don’t expect price cuts this year. Although new construction is expected to pick up, “builders will not be delivering enough housing to close the housing shortfall,” says Lisa Sturtevant, chief economist at Bright MLS, a multiple listing service in six Mid-Atlantic states and Washington, D.C.