Real estate in 2023: A return to 'slow and steady wealth building' 

After the wild roller coaster ride that was the 2022 housing market, many experts are predicting a much quieter 2023. But that also means it will take a while for the market to warm up again.

For its 2023 Real Estate Expert Survey, the home equity company Point polled economists and industry leaders from organizations such as the Mortgage Bankers Association, Tomo and Zillow to find out what they thought would happen to mortgage rates and home sales in the coming year. 

The single-most significant factor that will influence the real estate market this year? The actions of the Federal Reserve, according to nearly half of the respondents. 

Most of those surveyed expect mortgage interest rates to remain at or below 7% through the first half of the year, while all respondents expect that to be the case by the end of the year. If rates remain relatively elevated as expected, most of those surveyed believe sales and home prices will drop in 2023.

That's been the case since the second half of 2022, and particularly during the fourth quarter as interest rates fluctuated between 6% and 7%, leaving many buyers and sellers on the sidelines.

"Many owners will be unable or unwilling to sell because they have a mortgage rate lock-in, meaning they can't list their home and shoulder a higher mortgage rate on a new purchase," said Spencer Rascoff, co-founder of Pacaso and Zillow, adding that sellers will sit tight, which will help the home renovation market.

If sellers are willing to bide their time, there may not be a lot of action until the Fed clearly signals it will stop raising rates, said Eoin Matthews, chief business officer and co-founder at Point. Matthews also expects big coastal markets, which were among the first to correct in 2022, to rebound the quickest.

However, any sort of rebound will be softened if there is little inventory, said Mike Fratantoni, chief economist at the Mortgage Bankers Association. That means except for the hottest markets, prices may not come down enough for potential buyers.

Still, stability can improve affordability in the long term. "Cities, especially in the lower-cost areas of the country, including many in the Midwest, are likely to see fewer wild swings in home prices, making the homeowning experience more stable and not as exhilarating for sellers or as scary for buyers," said Paul Bishop, vice president of research and T3 Sixty economist. (Note: Real Estate News and T3 Sixty share a founder, Stefan Swanepoel.)

These market conditions could bring back more traditional attitudes about housing and wealth — namely, that homeownership is a long game, not a speculative investment.

"A 'fast' track to build wealth is not as clear as it was when rates were at their lowest and home price appreciation stunningly aggressive," said Skylar Olsen, chief economist at Zillow. "And so that makes home buying into what it was long considered to be: a path to slow and steady wealth building, a way to pay yourself the landlord's take, and to run your own house/kingdom as you choose."