According to Housingwire’s Lead Analyst Logan Mohtashami, a savagely unhealthy housing market in 2022 resulted in massive bidding wars and price spikes until the Fed put an end to all of it with rate hikes that led to the most significant spike in mortgage rates in history. The housing market fell into a recession in June and mortgage volume plummeted.

Let’s dive into Mohtashami’s views on how the housing market will behave this year.

Prices of Homes

Mohtashami’s affordability index will continue to show pressure on home prices as long as rates remain above 5.875%. National home prices are expected to decline by 5.9% — 7.4% in 2023, assuming rates stay above 5.875%. As the rate rises from this level, affordability will be hit more significantly.

Rates of Mortgages

As long as the economy remains stable, Mohtashami anticipates the 10-year yield to range between 3.21% — 4.25% in 2023. It’s possible to get as low as 2.73% on the 10-year yield if the economy gets weaker, especially if the labor market breaks down, which is when jobless claims reach 323,000 or beyond.

Housing Inventory

Mohtashami is still sticking to his call that for 2023, inventory levels of 1.52 — 1.93 million in 2019 should be broken. As new listing data declined since those forecasts in June, he acknowledges that so much had changed in the housing dynamics.

Recession in Housing

Until new home sales are growing and monthly supply gets below 6.5 months on a three-month average, the new home sales sector and housing starts will not get out of recession according to Mohtashami. At 8.6 months, there are still many homes that are being built or haven’t even begun.

The Economy in General

Avoiding a recession in the United States will require a fall in inflation growth rates. For 2023, the most important data point is the number of jobless claims. On the four-week moving average, as long as it stays away from 323,000 – Mohtashami’s critical level, we won’t experience a recession in 2023 Mohtashami stated.