The year 2023 has posed challenges for many homebuyers, with soaring home prices and unaffordable mortgage rates. A scarcity of housing supply intensifies competition among buyers, raising the question: Will the housing market crash next year? Let us delve into expert insights to unveil the real estate forecast for the next 5 years.

National Real Estate Market Numbers and Trends

Prior to exploring predictions, let’s examine the current state of the housing market. According to recent data from the National Association of Realtors (NAR), the median sales price for existing homes has risen by 2.8% to $394,300. Existing home sales have reduced by 2%, reaching an annual rate of 3.96 million. The unsold existing home inventory has increased by 2.7%, totaling 1.1 million homes, equivalent to a 3.4-month supply at the current sales rate.

• $394,300 – Median existing-home sales price (up 2.8% year-over-year)
• 21 days – Average days on the market in September (up from 19 days a year ago)
• 31.2% – Homes selling above list price (up from 30% a year ago)
• 29% – Percentage of home sales from first-time buyers (down from 30% in July)
• 7.63% – Average conventional 30-year fixed mortgage rate
• $40,000 – Amount of purchasing power lost by a homebuyer on a $3,000 monthly budget over the past year

Current Housing Market Overview

Before exploring experts’ forecasts, let’s gain insights into the present state of the real estate market from industry authorities:

• Clifford Rossi, Finance Professor, University of Maryland’s Robert H. Smith School of Business: “The US housing market is buffeted by high interest rates and low housing inventory, creating the worst affordability crisis in memory.”
• Rob Barber, CEO, ATTOM: “The market is in flux, pushed and pulled by multiple forces. Recent spikes and drops indicate a market responding to various influences.”
• Albert L. Lord III, Founder/CEO, Lexerd Capital Management: “The real estate market is supply-constrained, reaching unaffordability levels. High mortgage rates and limited new construction contribute to rising median prices.”
• Andrey Shirshikov, Professor of Economics at City University of New York: “Home prices are cooling off due to rising mortgage rates, with inventory levels rising.”
• Jay Garvens, Business Development Manager at Churchill Mortgage: “The national real estate market is in a state of political chaos, without enough bolstering it.”

Will Housing Prices Drop in the Next 5 Years?

While forecasts vary, the consensus is that home values will continue to rise, though at a more moderate pace:

• Selma Hepp, Chief Economist for CoreLogic: “Home prices have held up due to historically high demand.”
• Jay Sanders, Owner of Castle Dream Construction: “Housing prices are set to gently rise over the next 5 years due to high demand, low supply, and low interest rates.”
• Albert L. Lord III: “The rate of growth in home prices will decline, with a projected slowdown attributed to future improvements in new construction deliveries and lower interest rates.”
• Andrey Shirshikov: “Expect a gradual climb over the next 5 years, with potential dips and rises influenced by factors like inflation and economic growth.”

Will Housing Inventory Increase in the Next 5 Years?

Forecasts suggest a gradual increase in inventory over the next 5 years:

• Andrey Shirshikov: “Inventory levels are expected to gradually increase as new construction catches up and the economy stabilizes.”
• Albert L. Lord III: “The current inventory at 1.1 million units is not expected to change in 2024.”

Will We Shift Into a Buyer’s Market?

Forecasts vary, with expectations ranging from a continued sellers’ market to a potential shift toward a buyers’ market by 2027 or 2028:

• Selma Hepp: “The market will continue as a sellers’ market, possibly tilting toward a buyers’ market if demand weakens.”
• Albert L. Lord III: “I expect the real estate market to be a sellers’ market until 2027 and 2028, when supply and demand will be closer to equilibrium.”

Will the Housing Market Crash or Suffer a Recession?

Experts provide insights into the risk of a housing market downturn:

• Albert L. Lord III: “No recession predicted, barring catastrophic events. Lack of housing in general, coupled with low mortgage rates, contributes to market stability.”
• Vlad Gelios: “Talk of a housing crash lacks indicators. Lack of proper housing inventory is the main factor preventing a market crash.”
• Andrey Shirshikov: “While possible, a full-blown housing market crash is not currently foreseen.”

Considering expert insights, prospective homebuyers should approach the next 5 years with cautious optimism. While home prices may continue to rise, the pace is expected to slow, providing a more balanced market. The potential for increased inventory and lower mortgage rates by 2027 or 2028 may favor buyers, offering more options and easing affordability concerns. As with any investment, staying informed and assessing the evolving market dynamics is key to making prudent decisions in the ever-changing landscape of real estate.