Home Value Forecast: Where Is the Housing Market Heading?

The real estate market has been on a roller-coaster journey in recent years. It’s getting more and more difficult to make a home value forecast.

Following a blazing hot market with fierce bidding wars and low-interest rates, mortgage rates eventually reached their highest point in two decades.

This surge in rates led to a slowdown in home-buying activity. Despite the cooling down, the scarcity of available properties combined with persistently high mortgage rates has resulted in unaffordable home prices across various states in the United States.

As we look ahead, there are numerous speculations about the housing market’s trajectory in 2023. However, it’s crucial to consider the long-term implications since purchasing a home is often a decision requiring extensive planning.

In light of this, Bankrate conducted a study where real estate experts in the residential sector were asked to provide a five-year home value forecast. Here are some significant findings regarding real estate prices.

Some intriguing facts about the current housing market

In April 2023, the National Association of Realtors (NAR) reported that the median sale price of existing homes in the country was $388,800. However, according to the National Association of Homebuilders (NAHB), new-construction homes had a slightly higher median sale price of $420,800.

Despite being higher than the previous year, the supply of homes for sale remained quite low. There were unsold existing homes having a 2.9-month supply in April. A balanced market would typically require a five- to six-month supply.

Due to the limited housing inventory, homes are still selling relatively quickly, although not as rapidly as in 2022. In April this year, the average time homes spent on the market was 22 days. This is a notable increase from the 17 days in April last year.

The number of existing homes sold nationwide has decreased. Many homeowners opt to stay in their homes, benefiting from locked-in mortgage rates that are much lower than the current rates. In April, home sales were down more than 23 percent year-over-year, as reported by NAR. However, sales of new single-family homes experienced a 4.1 percent rise in April compared to March, according to NAHB data.

As of early June, a national survey of large lenders indicated that the average 30-year mortgage rate stood at a high of 6.91 percent.

What is the forecast for mortgage rates and loan types

Economists and housing experts believe that mortgage interest rates may continue to rise for the remainder of this year and most of 2024. However, you can anticipate a slight decline in rates to around within the next two years.

Due to the higher interest rates, you can expect a growing interest in adjustable-rate mortgages throughout the following year. Nevertheless, a majority of Americans will revert to the more traditional 30-year fixed-rate mortgages. The 30-year fixed-rate mortgage will remain the predominant mortgage product. That’s because borrowers value the certainty it offers.

What is the home value forecast?

The experts anticipate that nationwide purchase price tags will remain relatively stable next year, with small fluctuations in either direction. However, in California, the market might experience a decline of up to 10 percent. This will be due to its high home costs – making the metropolitan city more susceptible to changes in interest rates.

Looking ahead, you can expect home prices to appreciate by about 15 to 25 percent over the next five years.

Some financial analysts predict that home prices will experience low to mid-single-digit annual appreciation in the next five years. This rate of appreciation would align with the long-term average of home prices rising slightly above the inflation rate.

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Will the housing market crash?

While the experts acknowledge that the residential real estate market exhibits bubble-like characteristics, they do not anticipate a burst. The projections indicate that house sales will hit a low point next year. But, there would be a gradual increase by 2027. Despite current higher mortgage rates, home prices remain robust. Even if there’s a 5 percent decline (or 10 percent in California) next year, it wouldn’t constitute a crash or a complete housing market recession.

Real estate experts maintain that a crash usually occurs due to oversupply. But, this is not likely – given the ongoing housing shortage. They predict that the supply-demand balance will be achieved within five years.

Many other experts and economists also concur that an imminent housing market crash is unlikely. The scarcity of inventory plays a significant role, and lending standards have become much stricter compared to the time of the Great Recession. Consequently, lenders are avoiding issuing loans to borrowers who may struggle to afford them, thus helping to keep foreclosure rates low.

Will we see a buyer’s market, anytime soon?

The experts anticipate that the prevailing seller’s market will persist as long as housing inventory remains scarce. However, looking ahead to five years, they envision a more balanced market where neither buyers nor sellers hold significant sway. Instead, the negotiation power between parties will be more evenly distributed and dependent on the specifics of each individual case.

In fact, the transition away from a seller’s market has already commenced. It may result in a balanced market in a few years. Many agents expect the markets that experienced the most rapid growth during the pandemic, such as Austin, Phoenix, and Boise, to be the first to cool down.

What type of homes should we expect more in the coming years?

The suburban market will maintain its strength as hybrid work schedules become more commonplace and commuting loses relevance. They’ll be growing particularly in areas with increasing populations, such as the Carolinas, Florida, Texas, and Tennessee.

Towards the end of 2022, the number of single-family homes under construction in big cities experienced a decline. In contrast, the construction of multi-family homes has been on the rise in recent years, mainly due to their affordability compared to single-family homes.

This trend has been encouraged by municipalities aiming to address housing shortages and provide more economical housing options. However, the multi-family market’s growth is expected to stabilize in the coming years due to factors such as high mortgage rates and inflationary building material prices.

What are the expert tips for buying a home?

Purchasing a home is a significant investment, and it’s sensible to begin saving for it five years in advance. To help you achieve this goal and become a homeowner by 2028, consider the following strategies:

Enhance your earning potential: One of the quickest ways to increase your income is by exploring job opportunities that offer higher salaries. Studies have shown that around 60 percent of workers who changed jobs experienced a salary increase, even accounting for inflation. If switching jobs isn’t feasible, consider approaching your current employer for a raise.
Reduce your debt: Besides accumulating savings, it’s essential to focus on reducing your outstanding debts, such as credit card balances, student loans, and car payments. By lowering your debt-to-income ratio, you’ll improve your chances of qualifying for a mortgage in the future.
Improve your credit score: A higher credit score typically leads to a lower mortgage rate. Most mortgage options require a minimum credit score of 620, but having a higher score is advantageous. Prioritize paying bills on time and take steps to boost your credit score before embarking on your house-hunting journey. It can save you a significant amount of money in the long term.
Focus on the local market: Real estate conditions are highly localized and can vary significantly not only by region or state but also within the same city. While staying aware of national trends is important, concentrate on the specific neighborhood where you plan to buy your home.
Seek the expertise of a local real estate agent when the time comes. A knowledgeable realtor will guide you through the market conditions in your desired area. And, help you make informed decisions about buying a home.

Last thoughts

Given the recent unconventional patterns in the housing market, it’s natural to seek the most up-to-date information before making any decisions regarding buying or selling a property. Real estate experts use data to make their best predictions, but it’s essential to understand that absolute certainty about the market’s future is not possible.

Relying on a housing market forecast can offer insights into potential trends when considering a property transaction. However, it is crucial not to allow such predictions to dictate your housing choices. Instead, base your decisions on your individual circumstances and financial situation.

What do the experts have to say about home value forecast? was last modified: June 11th, 2025 by Ramona Sinha

Written by Ramona Sinha. August 3, 2023

Ramona is the Senior Content Writer for Kukun. This experienced blogger uses simple and succinct words to decipher the complex phenomenon called life. She has written articles covering a broad range of topics, such as real estate, lending and mortgage, finance, business, taxation, home designs, home improvement projects, decor concepts, and more. An avid traveler, she’s a digital nomad at heart and an animal lover from the depth of her soul.