Bright Chief Economist Dr. Lisa Sturtevant examines the economic factors that determine which markets are most at-risk, as well as five local housing markets these factors currently impact the most.
NEWS
Bright MLS Housing Market Outlook
Dr. Lisa Sturtevant has your Mid-Atlantic housing market forecast for the second half of 2022 and 2023.
The party is over.
After 2+ years of bidding wars, buying sight unseen, and prices rising three times faster than normal, housing market conditions are slowing down. This should be treated as a welcome reprieve, a chance for buyers, sellers, realtors, lenders, and everyone who watches the housing market to catch their breath and reset. Overall, expect housing market activity to continue to slow through the second half of 2022 and into early 2023, with adjustments to sales and price growth putting market conditions more in line with pre-COVID trends.
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Several economic headwinds are working to decelerate the housing market, most notably higher mortgage rates, high inflation, and general economic uncertainty. However, underlying demographic and economic fundamentals suggest no major housing market downturn. Instead, during the second half of 2022 and 2023, the housing market will return to a more typical level of home sales activity, with seasonality re-introduced to the market.
Low mortgage rates had been a huge driver of housing demand during the pandemic. But rates have risen at a historically fast rate in the first half of 2022. For the rest of the year, rates likely will bump around, trending slightly upward. The push and pull on mortgage rates results from Federal Reserve rate hikes along with global economic uncertainty and reduced mortgage demand. The rate on a 30-year fixed rate mortgage is projected to hit a high of 6.0% in Q3 2022, but will end the year at 5.5% with mortgage rates continuing to hover in the mid- to high-five’s through 2023.
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Mortgage Rates (average 30-YR FRM, %) |
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| 2022 | Q1 | 3.82 |
| Q2 | 5.27 | |
| Q3 | 5.80 | |
| Q4 | 5.50 | |
| Annual | 2022 | 5.10 |
| 2023 | 5.50 | |
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Overall, expect housing market activity to continue to slow through the second half of 2022 and into early 2023, with adjustments to sales and price. In some localized markets, there could be year-over-year price declines, but very low inventory and strong demographically-driven demand suggest no widespread price drops. Supply will expand some, but inventory will continue to be constrained in the second half of 2022 and 2023 as a result of “rate lock” where existing homeowners have locked into 30-year mortgages at sub-three percent rates and are disincentivized to move to take on a mortgage with a higher rate.
It’s hard to imagine moving quickly from a strong seller’s market, with three months of supply nationally and 1.3 months of supply across the Mid-Atlantic, to a market where buyers can force prices down significantly.
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| Sales | 2022 | Annual | ||||
| Q1 | Q2 | Q3 | Q4 | 2022 | 2023 | |
| Mid-Atlantic | -6.6% | -11.4% | -10.7% | -5.0% | -8.7% | -0.3% |
| Philadelphia | -7.0% | -11.3% | -10.0% | -5.0% | -8.5% | 1.0% |
| Baltimore | -6.5% | -11.7% | -14.0% | -9.1% | -9.1% | -0.6% |
| Washington D.C. | -10.9% | -17.6% | -7.9% | -10.3% | -10.3% | 3.3% |
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| Median Home Prices | 2022 | Annual | ||||
| Q1 | Q2 | Q3 | Q4 | 2022 | 2023 | |
| Mid-Atlantic | 8.8% | 8.6% | 5.8% | 3.3% | 6.6% | 2.1% |
| Philadelphia | 10.1% | 10.7% | 4.2% | 2.7% | 6.8% | 2.0% |
| Baltimore | 6.9% | 8.2% | 5.5% | 3.0% | 5.9% | 2.5% |
| Washington D.C. | 7.5% | 7.7% | 6.4% | 4.6% | 6.5% | 3.8% |
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U.S. and Regional Forecasts
U.S.
Nationally, in 2022, home sales are projected to be down 9% compared to last year’s frenzied market. Home sales will continue to be down slightly in 2023 (down about 1% compared to 2022). The median home price nationally is expected to be up by about 8% in 2022, which a year-over-year gain of 4% in 2023.
Mid-Atlantic
Typically a stable market with no wild swings either way, the Mid-Atlantic region is expected to see housing market conditions that mirror overall average U.S. trends in the second half of 2022. Home sales are projected to be 10.7% lower in Q3 2022 compared to Q3 2021. In the 4th quarter, sales are projected to be down 5.0% compared to the end of 2021. In 2023, seasonality will return to the market and the overall number of sales will be flat compared to 2022 (-0.3%).
Home prices will continue to rise at the regional level, with the median price forecasted to be up 6.6% in 2022 compared to 2021. Price growth will be slower in 2023, with year-over-year price appreciation at 2.1% for the Mid-Atlantic. Prior to the pandemic, home prices had been rising by about 3% annually in the region.
Other Resources
Download this infographic to share key findings from the 2022-2023 Housing Market Outlook:
To stay informed about housing market conditions, be sure to make use of Bright’s housing market reports and get a preview of future buyer activity by tracking the Bright MLS T3 Home Demand Index for the Philadelphia, Baltimore, and Washington DC regions.
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Dr. Lisa Sturtevant serves Bright MLS as the nation’s only MLS-focused economist. She leads research, reporting and insights from Bright’s comprehensive array of real estate data. In 2021, Bright’s over 100,000 subscribers facilitated $142B in real estate transactions through its system stretching across 6 states and the District of Columbia.
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