USA Real Estate Market – What Is The Outlook For 2023

lighted beige house

The predictions for the real estate market in the USA in 2023 have been all over the place, with some quarters saying the median home price could drop by more than 3%. 

Others say the biggest migration destinations in the pandemic times will see the biggest drop in prices. The price of homes in these places will drop up to 25% of their value. 

Overall, the general sentiment is that the direction the market takes will depend on the Federal Reserve rates. As Saul Z owner of I Buy Il says, “The slow  home sales that the market experienced in 2022 will continue in 2023 unless the Federal Reserve lowers the interest rates, which is not likely to happen.”

By 2022, many people were wondering whether there would be a real estate crash in 2023. There will not, despite some places losing value. In most places, the price fall will be moderate. Several places might also record considerable gains. 

The scenarios that are likely to play out for the real estate in 2023 are as follows:

The Federal Reserve will continue raising rates

For more than 15 months, inflation has pounded the economy brutally. And the Federal Reserve has been raising rates, the last one being a 0.25% raise. In April 2023, The inflation rate in the United States reached 4.9%.

This definitely affects the mortgage industry in a big way, with home loans becoming costlier. High prices lock many potential buyers out.

When the rates are high, first-time home buyers might want to hold off buying their home for a while longer. The lenders will require them to post a bigger down payment, which they don’t have because they have not sold a home. 

Since 2022, the Fed has raised the rates. The mortgage rates took the same direction but at a slower pace, rising from 3.2% in January 2022 to 6.6% by May 2023. 

If the information showing that the Fed has reached, or is about to reach the end of rate increases is true, the mortgage rates might start dropping too. Normally, when the Fed rates rise, mortgage rates follow suit and vice versa.  

A more balanced market – not buyer or seller tilted

2021 and 2022 were a seller’s market but 2023 does not seem to favor any side. The market is bound to stay more balanced without tilting in favor of either the buyer or the seller. 

The high interest rates will lower the buyer demand for homes. The number of homes available in the market will not change, as you can see in this CEO Today article

This is why some real estate gurus are arguing that 2023 and going into 2024, will be a balanced market. 

The trend of 2021 and 2022 where buyers were looking for suburban homes because of space will continue waning in 2023 going forward. Any demand that was driven by the pandemic will drop. 

People are going back to working from the office, the pandemic has been declared as under control by the World Health Organization. The market could go back to pre-pandemic status. 

Volatile market in places that experienced pandemic migration

If there is going to be a drop in the prices of homes, the places that gained the most during the pandemic in 2020 are going to be among the biggest losers. 

Malibu, California, Boise, Phoenix, and Austin were the target destinations for many people during the pandemic. 

Now that the pandemic has since been brought to heel, the real estate market in these places is starting to stabilize. The prices of homes are plummeting. 

Because of the high prices that these places experienced in 2020, 2021 and 2022, they will experience the biggest drops. 

It is expected that by 2024, the prices could go back to what they were pre-pandemic, of course, with the Federal Reserve making positive moves on the rates. The places that gained most will have the biggest drops. 

Some places will gain substantial value

In some places, the price of homes is likely to keep going up in 2023 for various reasons.

The prices of homes in some parts of California will rise because of the increase in insurance cost. The same applies to some places in Florida

These places are considered climate risks, and that is why the price is rising considerably. With many insurers having stopped issuing policies on homes that are prone to fire or hurricane risks, the available insurance is more expensive. 

There will not be a housing bubble

A real estate bubble occurs when housing prices shoot up and keep rising, as they did in 2021 and 2022. When they get to the highest, they start plunging. And they fall hard. 

However, in 2023, that is not going to happen because even though the housing prices have fallen sharply in some parts, it is more like stabilizing to normal post-COVID prices. 

The houses on sale right now seem to be the same as they were in 2022 and 2021. This means the demand is still higher, and as employers start holding onto their employees as they don’t want to lose skilled labor, the demand for the homes might rise gradually. 

Prices for homes not likely to drop in 2023

For almost three years before 2023, there has been a supply shortage. This is going to persist in 2023 and beyond. 

Since the main determinant of price is demand vs supply, if the number of homes listed stays low, the prices will not change. 

As the market looks now, even if there are more homes listed, they will just even out the existing discrepancy between demand and supply. 


Rising federal interest rates in 2022 to 2023 and fewer homes being listed for the third year in a row make the market more or less the same as it was in 2022. 

The only difference is that while 2022 was a seller’s market, 2023 is nobody’s market as the high-interest rates balance the market out. It is not in anyone’s favor right now. 

The good news is that there will be no housing crash in 2023.