It’s been a housing market roller coaster the past few years with no shortage of news about record-high prices, outrageous negotiations (like all-cash deals and cars), and questions about if there’s a bubble and if it’ll burst. The pendulum swung from a buyer’s market to a seller’s market as the effects of the pandemic changed people’s behaviors. Families started feeling cramped after sheltering in place for more than a year, global supply chain issues picked up, and then-low interest rates began climbing.
While we’ve seen the stark rise in home prices flattening out a little from 2022, this downturn won’t wholly correct itself to pre-pandemic levels.
The most recent Case-Schiller Home Price Index, one of the leading indicators of U.S. residential real estate prices, showed that home prices decreased quarter over quarter but are still 7.7% higher than a year ago. It’s worth noting that seasonality plays a role here, too, so we currently see some prices slightly lower given the time of year.
So yes, we’re still in an affordability crisis and unlikely to see the complete housing market tumble — let alone a housing market crash — in 2023. Here’s why.
1. Homeowners are reluctant to sell
We’ve seen this anecdotally as homeowners come to Splitero to access their home equity instead of selling. Now the data is out: January 2023 U.S. Existing Home Sale volumes are down 34% compared to January 2022, according to the National Association of Realtors. This is the 12th straight monthly decline in existing home sales.
Homeowners have a low motivation to sell because many are locked into low-rate mortgages and don’t want to give up that rate to sell and repurchase a more expensive home with a higher mortgage rate. With affordability at an all-time low, homeowners are finding ways to access their home equity for renovation projects to suit their needs better. Homeowners also use their increased equity to pad retirement and savings accounts, pay off high-interest credit card debt, and supplement living expenses as inflation grows.