Recent reports by Zillow are expecting the real estate market to firmly be a buyer’s market be by the end of 2023, if not sooner. Based on several key economic trends. Unattainable mortgage costs are currently driving down buyer competition. Many economists view this as a turning point for buyers to gain the upper hand soon. Zillow and other research panels are expecting rent growth to outpace inflation by 2023 as increasing renter populations put pressure on the market.
A post-pandemic market
Home price growth is gradually slowing post-pandemic. As mortgage rates hit a peak, pricing many shoppers out of their real estate needs. Metropolitan areas with the highest price hikes are seeing more rapid declines. While suburban areas are seeing more steady changes in mortgage costs to reflect the declining buyer pool.
Nonetheless, the market is still in the seller’s favor for now. According to Zillow, the average time a listing stays on the market is still 11 days shorter than it was before the pandemic. Inventory is still down nearly 42% compared to 2019. Changes required to shift into a buyer’s market are steep, but a majority (56%) of Zillow’s panelists believe it will happen by the end of next year.
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Other panelists predict the shift into a buyer’s market between 2024 and 2025. But the change is coming soon. Senior economist for Zillow Nicole Bachaud said.
“After the frantic rush for real estate over the past two years, buyers are finally seeing a calmer market. Those still able to afford homeownership are quickly regaining lost leverage. But this shift to a more balanced market is still in its early stages. Home shoppers priced out of the market are in a tight spot, though, as high and rising rents could cut further into their ability to save up for a down payment.”
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The panel predicts that inexpensive Midwest markets are the least likely to see home prices decline over the next 12 months. As well as fast-growing markets in the South, like Atlanta, Nashville and Charlotte. However, some southern markets that saw exponential growth during the pandemic are predicted to drop the fastest in 2023.
Panelists also predict Rent growth to remain strong over the next 12 months. Even outpacing inflation, the stock market, and home values. This may incentivize developers to focus on multifamily. This may limit growth in residential real estate and adding to the pressure on the market.
For more information on the Zillow study and predictions, click here.
