Is the Housing Market Slowing Down?

It seems like just yesterday that the housing market was booming, and home prices were skyrocketing. But now, it looks like the housing market might be slowing down. 

As someone who has been involved in the housing market for quite some time, I’ve noticed many changes over the years. 

Home prices have skyrocketed and then dropped again, mortgage rates have shifted up and down, and the number of homes available on the market has fluctuated.

Recently, it seems like things are settling into a new normal – sparking many questions about whether the housing market is slowing down. 

In this article, I’ll dive into the data to provide insight into what’s happening in the housing market. 

Home Sales are Slowing Down

The first main sign of the slowing housing market is an increase in home inventory, as shown by the fact that in June 2022, there were 19% more available homes than in the same period in 2021. This is a clear indication that home sales are slowing down. 

The evidence is clear: 

  • Home inventory is increasing
  • Demand is waning
  • Buyers are taking longer to make decisions or backing away from purchases altogether.
  • An influx of homes for sale results in slower home sales.

Home sales are slowing down, which will likely impact the housing market.

Mortgage Applications are Slowing Down

The housing market might be cooling off a bit – mortgage applications recently declined by 1.9%, according to the Mortgage Bankers Association.

In other words, fewer and fewer people are looking to buy or refinance their homes.

This is largely due to:

  • High borrowing costs
  • Increased home prices
  • Potential buyers having second thoughts about investing in real estate right now
  • Some are waiting for housing prices to decrease before considering buying or refinancing
  • Others opt for different forms of investment altogether.

These factors contribute to the decrease in mortgage applications, indicating that the housing market is slowing down. 

Real Estate Prices Have Dropped

Times have changed in the real estate market. As inventory grows and competition for homes gets tougher, more sellers are slashing their asking prices to attract buyers.

  • In May 2022, 10.5% of sellers reduced their price tags—a whopping 4.3 percentage point increase from the year prior.
  • According to CoreLogic’s Home Price Index forecast, annual pricing growth reached 8% this December and will slowly work its way down to 0% in early 2023, which is quite a drop.
  • After this drop, analysts will monitor real estate sales to estimate the size and speed of the correction possible in the next few years.

These projections give us crucial insight into what is happening with the housing market. They could determine how mainstream buyers strategize their investments in 2021 and beyond.

For buyers, it’s a great time to be on the market.

For those who must part with their homes sooner rather than later, however, there’s no denying that this shift in the market will be tough to deal with.

What Can You Expect in 2023?

2023 is likely to bring many changes, but the potential declines in house prices are a big concern.

Morgan Stanley predicted that the average price of a house could fall 10% in the two years from June 2022 to 2024. 

While this figure seems alarming, it’s significantly lower than what happened last time during the housing market crash, during which home prices dropped 27% between 2006 and 2012.

Luckily, there are key differences this time due to a virtuous cycle fueled by a resilient labor market and low inventory, keeping things relatively steady despite the global pandemic. 

Other important factors, such as:

  • Low mortgage rates
  • Stable economic indicators
  • High job growth
  • New technological advancements
  • Consumer trends that affect mortgage rates and lending practices

Will also have a say in the future of the housing market. 

This critical real estate forecast is worth discussing at length to better understand what we can expect in 2023.

Home Sales Dropping

With last year’s high mortgage rates and a possible economic recession in view, it looks like this might be a rocky year for real estate sales.

The housing market is predicted to take a downturn in 2023 due to several factors. 

This lull mostly comes from:

  • High mortgage rates
  • Costly prices
  • Potential for an economic recession
  • Affordability issues for potential buyers
  • Fewer people are eager to move and buy property.

Redfin expects home sales to drop by 16% compared to 2022, which is quite significant. It simply means that folks are not as eager to move and buy property.

These factors indicate that the housing market is indeed slowing down, requiring prospective buyers to be more mindful before investing in a new home.

The forecasts from CoreLogic’s Home Price Index and Morgan Stanley give us crucial insights into what is coming, but that is not to say that the future is certain. Only time will tell how the market will eventually turn out. 

Continued Mortgage Rate Decline

The real estate market is fluid and can be hard to navigate. But, if you’re looking to purchase a home in 2023, then Redfin believes the perfect storm might arrive this year. 

If the housing prices were to drop, but interest rates were to fall too, mortgage rates could decrease from 6.5% to 5.8%. 

For example:

  • Someone looking to buy a home for $250,000 with a 20% down payment and a 30-year fixed mortgage at the current rate of 6.5% would have a monthly payment totaling $1,264.
  • However, if the mortgage rate were to decrease by 0.7%, this person would benefit from a monthly payment of $1,179.

This is a savings of almost $85 per month! 

The drop in mortgage rates means potential buyers would have access to higher-value properties while paying lower monthly payments – ideal for first-time home buyers! 

It all sounds great, but without further information, it’s impossible to guarantee. So, keep an eye out as things play out over the year – you never know what opportunities may arise!

Decrease in Real Estate Prices

The real estate market may soon feel some of the pandemic’s effects.

Redfin predicts that home prices will take an annual dip of around 4%, bringing the median home price down to a still-pricey $368,000 in 2023.

Decrease in Real Estate Prices



This marks the first year-on-year dip in real estate prices over a decade; up until now, we’ve seen successive increases each year. It remains to be seen how the wider economic picture will shape housing prices next year and beyond.

But it’s not all doom and gloom – there is a silver lining. 

If folks keep their houses on the market and don’t sell because they’re satisfied with their current fixed mortgage rate or if they feel the new selling point won’t be worth it, housing inventory will stay low.

Meaning there is still hope for overall market stability.

How You Should be Investing

With signs that the housing market is beginning to slow down, it is important to consider whether you should be investing. 

While it is always best to be informed and make an informed decision, many experts suggest waiting until the crash may be the smartest move. 

How should you be investing?



By waiting slightly later than when the market is performing less than ideal, you can find yourself with much more value in your investments.

While you wait for housing prices to lower, there are still ways you can invest in your current property to prepare for the crash.

Put your home’s equity to work.

Home equity is the total value of your home, with your mortgage provider holding the rest. 

You can calculate your home’s equity by taking your current property value and subtracting the remaining mortgages and liens balance. 

One of the main ways to boost your home equity is by paying off your mortgage. However, your home equity can also increase with the value of your home. 

To get an idea of any equity gains from your home’s value appreciation:

  • Consult a local real estate agent who will prepare a comparative market analysis (CMA) that uses similar property sales in your area to calculate a ballpark value of your home. 
  • After this, if you choose to take out a home equity loan, your lender will likely require you to get a formal home appraisal.

Although the housing market slowed in 2022, most homeowners still sit on significant gains in their home’s value from 2020 and 2021 because there aren’t enough homes built to meet overall demand.

Homeowners that take out home equity loans frequently use the funds to invest in home improvements. 

A few investments include:

  • Finishing the basement which can recoup about 70% of the cost at resale.
  • Tackling a minor kitchen can recover about 77% of the price at resale.
  • Replacing your garage door, which can recoup 95% of the cost at resale.

With so many discussions around whether or not the housing market is slowing down, there is no easy answer when it comes to investing. 

You’re worried about losing out on investment opportunities, but you also don’t want to risk your hard-earned money for a house worth less than your mortgage payment.

Putting your home equity to work can provide you with the funds needed to improve your home’s value and help you get the most out of your investment.

Conclusion

So is the Housing Market Slowing Down? It looks like it is. 

  • The number of homes for sale is increasing
  • Mortgage applications are decreasing
  • And buyers are taking longer to decide or backing away from purchases altogether.

These changes all point to a gradual slowdown in the housing market.

However, it is important to note that this is not necessarily bad. 

A slowdown can often mean more manageable prices and a better balance between buyers and sellers.

Ultimately, the housing market is always changing – so it is important to stay informed on the latest trends. That way, you’ll be able to make smart investment decisions and get the best deal possible.

As always, it is wise to consult a professional financial advisor before making any major decisions about your money.

With the right knowledge and guidance, you can decide whether now is a good time to buy or wait for the market to settle down.

We’d like to hear your thoughts; is the housing market slowing down and is now a good time to invest? Let us know what you think in the comments. 

Frequently Asked Questions

Will US home prices drop in 2023?

It is difficult to predict what will happen to home prices in the future. As of now, the market is showing signs of cooling off, and it is possible that the pace of appreciation will slow down significantly over the next year or two. It is important to pay attention to factors such as mortgage rates and housing supply before deciding to invest in the housing market.

Is the US housing market slowing down?

Yes, the US housing market is slowing down after a period of rapid appreciation. This is due to factors like increased mortgage rates and decreased housing supply on the market. It is important to pay attention to these changes before making any decisions about investing in real estate.

Will house prices go down in 2023 in the USA?

At this time, it is difficult to predict what will happen to house prices in 2023. While the housing market does show signs of slowing down, and home prices have declined in some areas, it is unclear whether those trends will continue or worsen over the next year or two.

Will 2023 be a good time to buy a house?

If you are taking a long-term approach to investing in real estate, 2023 could be a good time to buy a house since home prices may be more affordable than they have been in recent years.

Should I wait for the recession to buy a house?

It is important to consider your own personal financial situation before making any decisions about investing in real estate. If your finances are secure, then waiting for a recession to buy a house may not be necessary. However, anticipate that economic conditions will worsen over the next year or two. It may be wise to wait until after the recession is over before purchasing.

Is it a seller’s or buyers’ market in 2023?

At this time, it is difficult to predict what the market will look like in 2023. However, given current trends, it is likely that the housing market will be more balanced between buyers and sellers as home prices start to stabilize and mortgage rates remain relatively low.

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