SEATTLE — The housing affordability crisis could be easing, according to economists for real estate website Zillow, but there are also other changes going on that are reshaping the market for 2023.
Among the predictions from the Zillow economic research team are:
- Despite mortgage rates doubling since 2019, affordability will improve in 2023. Zillow economists see the market stabilizing at the very least, making it possible for households to budget and plan for housing decisions. And home values are expected to remain relatively flat or even fall in some markets.
“Americans finding ways to make payments on a roof over their heads is going to drive the market next year,” said Skylar Olsen, Zillow’s chief economist. “Affordability is going to be the biggest factor in housing in 2023, but there’s room for optimism on that front as mortgage rates recede.”
- The Midwest will be a hot market. Not only have prices not risen at the same rate as other areas of the country, but there is inventory to be had, with more homeowners willing to list properties than elsewhere in the country. Zillow’s research shows mortgage costs are within reason compared with incomes in Missouri, Kansas, Iowa, Ohio and some areas of Illinois.
- Who wants to go in on buying a house? With costs rising above previous affordability norms, Zillow’s team predicts more family and even friends will be pooling resources to make a purchase. In a survey from earlier this year, Zillow found 18% of recent home buyers had purchased with a friend or relative who wasn’t a spouse or partner. This could ramp up, too, with the entrance of more Gen Z and Millennial buyers.
- More new construction will come from the rental market. There is a glut of single-family housing in the wake of the pandemic boom, but builders focused on multifamily units are feeling more bullish. Construction starts for multifamily have increased, up 8% in October since pre-pandemic levels, Zillow reported. Despite recession fears, there is confidence in demand for rental units, including build-for-rent single-family homes.
- Remember all those people who bought second homes during the pandemic? They could now become landlords, making 2023 a big year for first-timers in that category, Zillow predicts.
With rent growth expected to rise faster than home values over the next year, these second homes have the potential to yield regular income above the mortgage payment fixed with record low rates. Even homeowners looking to move in 2023 might decide to rent rather than sell, taking advantage of their low mortgage rate and the potential income stream afforded by high rents.
I’m Joanne Friedrick, research editor for the Home Furnishings Division. I began my career as a newspaper editor and then became a trade journalist, covering myriad industries including pension funds, supermarkets, gourmet food and security systems, just to name a few. Most recently, I entered the home furnishings category as a contributor for HFN and Home Textiles Today before transitioning into research where I now get to tell the stories behind the numbers for all of the HFD titles.