If you have been waiting for prices to drop to buy a house, 2023 could be your year. However, the fall in housing prices doesn’t bode as well for current homeowners — or the overall U.S. economy.
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Housing prices in October 2022 were 38.1% higher than they were at the start of the pandemic in March 2020, based on Fortune’s figures. However, they started to fall in November 2022, with prices down 2.4% from the peak in June 2022, according to the Case-Schiller National Home Price Index. Experts are predicting another 10% to 15% drop by the second or third quarter of 2023, according to multiple sources.
Several other factors point to a further home price correction. U.S. home construction fell for the third straight month in November, Reuters reported. Single-family housing starts fell by 4.1% in last fall, according to a Commerce Department report.
Additionally, institutional homebuyer YieldStreet reduced buying levels by 90%, while Blackstone-owned Home Partners of America also slowed their purchases. “We’re pretty much on pause across all [home buying] strategies,” Tejas Joshi of Yieldstreet told Fortune.
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Despite Housing Price Drop, Real Estate Supply Remains ‘Relatively Low’
As Macro Trends Advisors founding partner Mitch Roschelle told Fox business, supply of homes is still “relatively low,” with a 3.3-month supply on the market.
Uncertainty about the economy and a rise in unemployment could hasten the housing market downturn, creating the largest housing correction in the post-World War II era. The current correction stands as the second largest in the post-World War II economy, behind the housing market crash and mortgage crisis of 2008.
To put it into perspective, even a 20% drop in housing prices through 2023 would not put home prices back at their pre-pandemic level.
“[W]hat we’re doing is we’re giving back perhaps at most, a third or a quarter of the gains that we realized,” Roschelle told Fox Business. “But that doesn’t help somebody who just bought a house at the top of the market and now has something that’s lost 10%.”
Those buyers may be stuck where they are for the time being. Alternatively, they can consider renting their property or making home renovations that will increase their home’s value before a sale.
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