2023 NVAR Region 2023 Residential Market Forecast

The Northern Virginia Association of Realtors® (NVAR), in conjunction with the Center for Regional Analysis at George Mason University (GMU-CRA), issues a consensus forecast for the NVAR region’s housing market. The association convenes a panel of key experts from differing sectors of the real estate industry to review preliminary forecasts developed by GMU-CRA economists and offer their insights into current and near-future market conditions. The following represents the forecast team’s outlook for 2023
This forecast arrives at a time of market upheaval caused by a rapid acceleration of mortgage rates since the spring of 2022 as the Federal Reserve Bank aggressively increases interest rates to combat inflation. Continuing trends we found in the 2022 forecast mid-year update, the economy and equity markets are delivery mixed signals about the performance of the U.S. economy in 2023. The majority of observers expect the U.S. to enter into a recession sometime in mid-to late-2023, but there is little agreement on the depth or duration of an economic downturn.
The one thing we can clearly see is that rising mortgage rates are depressing overall residential real estate market activities across all product types and in all Northern Virginia jurisdictions and this will continue throughout 2023
As we enter winter, the war in Ukraine has devolved into a slog that now looks like a stalemate that could endure for years. This will keep pressure on energy and food prices. Wages, even adjusted for inflation, are rising according to the most recent data from the U.S. Department of Labor. While this is good for individual households, it likely means that inflation pressures on the costs of goods and services will remain elevated, which will keep the Federal Reserve in tightening mode longer than many analysts thought just a few weeks ago. However, supply chain issues are easing and both consumer and producer price indices are slowly ticking down.
The coming year is still a transition period from the old, pre pandemic, model of working to whatever will become the new normal. Return to office continues to rise, but with a few notable exceptions hybrid and even remote work looks like the driving force in labor markets. It seems that mortgage rates are coming off of 7+% highs but will likely average in the mid-6s for at least the next year. With all of that in mind, here’s our overall outlook for the NVAR housing market in 2023:
  • Demand will remain soft compared to the last two years as some households are priced out of the market due to elevated mortgage rates and others recover from the shock of missing out on 3%, or lower, 30-year fixed rates. Still, there is so much pent up demand that, by historical standards, this will continue to be a sellers’ market.
  • Inventories will get tighter, even with less absolute demand, as current owners bask in the joy of having very low mortgage rates. It will be hard to justify leaving a home with a refinanced loan below 3% for another home with a higher price and a loan rate that would be doubled.
  • Unit sales will decline, on average, though the drop off will not be as sharp as what we have seen in the third quarter of 2022. This will not be a particularly good year for realtor or broker revenues. On average, expect unit sales for 2023 to decline in the low double digits compared to 2022
  • Prices will remain stable, with general expectations of modest rises. This reflects the conflicting effects of affordability and lessening demand with continuing tight availability of homes and a resilient labor market. On balance, expect prices to rise by less than 1% on average

The Team USA Real Estate @ RE/MAX Executives 




Posted by Abuzar Waleed on
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