Fall in Silicon Valley is typically a time where we see the housing market rejuvenate itself from the slow down of the late summer months and kind of kick-start into gear again. Early fall tends to bring an increase in sellers putting their homes on the market and buyers recommitting to their home search, all resulting in an uptick in housing sales.
But these past few years have been anything but normal, with record-breaking rates of home value growth coupled with historically low mortgage interest rates. Then over the summer, the housing market began to cool as the stock market continued its decline and as mortgage interest rates precipitously rose. That meant less affordability and less buyer demand, which in turn caused homes to take longer to sell, with less bidding wars, and most notably, price decreases.
What the Experts Are Saying About Home Prices Next Year
Based on current market data, many of the experts have recently updated their own projections. Some have forecasted significant home price drops for 2023 up to 5.5% while others are forecasting up to a 2.8% price increase.
The latest forecast from Wells Fargo is that they feel prices may fall 5.5% in 2023, but even with this correction, they concluded:
That said, the long-standing shortfall in supply and strong underlying demand will ultimately limit the extent home prices depreciate. Even with a modest correction, prices are likely to remain above the average levels seen in 2021.
The graph below shows the most up-to-date forecasts from five experts in the housing industry:
As the graph shows, the three blue bars represent experts forecasting ongoing home price appreciation, just at a more moderate rate than recent years. The red bars on the graph are experts forecasting ongoing home price depreciation.
The good news is that these economists aren’t forecasting a housing market crash or a massive downturn. Even though there isn’t consensus among them, it looks like home price appreciation will be somewhat flat in the next year with prices settling a bit above home prices of 2021.
What does this mean for home buyers and sellers?
The answer to this is, it depends! If the neighborhood or town or city was overheated with high appreciation (which is most of Silicon Valley!), we’re definitely experiencing home price decreases that are bringing us closer to 2021 price levels.
Which experts will be correct about 2023 price forecasts? It’s hard to say as they look at a national or state-wide view, and locally here in Silicon Valley, our prices and economy differ from those norms while still following overall economic market trends.
Some experts are predicting that home prices in 2023 may drop further, closer to 2021 or even pre pandemic levels, while others are expecting a return to more normal levels of appreciation. The tricky bit in forecasting home prices is that they are affected not only by the economy, but also by the current market of inventory, buyer demand, location, condition of the home and floor plan.
“With the market shifting as home sales and prices are predicted to temper next year, buyers and sellers are adapting to the new realities of the market. As sellers adjust their expectations, well-priced homes are still selling quickly. And for buyers: more homes for sale, less competition, and fewer homes selling above asking price, all point to a more favorable market environment for those who were outbid or sat out during the past two years when the market was fiercely competitive.”
In summary
There’s no doubt that we’re seeing a shift in the housing market locally and nation-wide. That’s causing a lot of confusion, but it’s important not to let fear or uncertainty stop you from moving forward with your plans. Whatever it was - new job, new baby, new partner, more rooms, less maintenance, etc - that prompted you to consider selling or buying a home in the first place, that’s what’s important.
Let’s connect so you have a trusted real estate professional to help you make confident and informed decisions.
