Housing Market 5-Year Forecast Bankrate Caret RightMain Menu Mortgage Mortgages Financing a home purchase Refinancing your existing loan Finding the right lender Additional Resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Bank Banking Compare Accounts Use calculators Get advice Bank reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Credit Card Credit cards Compare by category Compare by credit needed Compare by issuer Get advice Looking for the perfect credit card? Narrow your search with CardMatch Caret RightMain Menu Loan Loans Personal Loans Student Loans Auto Loans Loan calculators Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Invest Investing Best of Brokerages and robo-advisors Learn the basics Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Home Equity Home equity Get the best rates Lender reviews Use calculators Knowledge base Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Loan Home Improvement Real estate Selling a home Buying a home Finding the right agent Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Insurance Insurance Car insurance Homeowners insurance Other insurance Company reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Retirement Retirement Retirement plans & accounts Learn the basics Retirement calculators Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Advertiser Disclosure
Advertiser Disclosure
We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. SHARE: On This Page
Westend61/Getty Images November 02, 2022 Dina Cheney Dina Cheney is a home and garden writer for Bankrate. A writer for 20-plus years, she’s contributed to publications including Good Housekeeping, Parents, Health, Men’s Health and SELF. Troy Segal is Bankrate's Senior Homeownership Editor, focusing on everything from upkeep and maintenance to building equity and enhancing value. Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo The Bankrate promise
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Buying or selling a home is one of the biggest financial decisions an individual will ever make. Our real estate reporters and editors focus on educating consumers about this life-changing transaction and how to navigate the complex and ever-changing housing market. From finding an agent to closing and beyond, our goal is to help you feel confident that you're making the best, and smartest, real estate deal possible. Bankrate logo Editorial integrity
Bankrate follows a strict , so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. Key Principles
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers. Editorial Independence
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo How we make money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. It’s been a wild real estate ride over the last few years. After a red-hot market characterized by bidding wars, low interest rates and elevated prices, mortgage rates increased to the highest level in 20 years, leading to a slowdown of both buying activity and purchase prices. Yet, with inventory still low, home price tags in many parts of the U.S. There are plenty of predictions about where the . But what about farther out? After all, often requires long-term planning. We asked several residential real estate experts to peer into their crystal balls and give us a five-year forecast of the housing market. Here’s looking at you, 2027. The current housing market
But first, a a snapshot of the residential real estate scene, as of autumn 2022. Lightbulb Home sales price: The median existing-home sales price rose 8.4 percent from one year ago, to $384,800, according to September 2022 from the National Association of Realtors (NAR). For new homes, the current average sales price nationwide is $470,600 — up around 14 percent from a year ago, says Danushka Nanayakkara-Skillington, assistant vice president, forecasting and analysis for the National Association of Homebuilders (NAHB). Inventory: Though higher than it was in January 2022, the supply of homes remains historically low, says NAR Chief Economist and Senior Vice President of Research Lawrence Yun. The inventory of unsold existing homes was at a. Days on the market: With inventory still tight, homes continue to sell quickly. In September 2022, the median number of days on the market for sold homes ranged from 13-23, depending on the price, according to the September NAR data. In a more typical market, it’s 45 days, says Yun. Homes sold: Fewer existing homes are selling nationwide. According to the September NAR data, during 2022, the seasonally adjusted total figure dropped from 6.49 million in January to 4.71 million in September. Meanwhile, sales of new single family houses in July 2022 were at a seasonally adjusted annual rate of 511,000—which is 29.6 percent lower than in July 2021, says . Thirty-year mortgage rates: According to , the current average 30-year fixed mortgage rate was 7.08 percent, the highest it’s been in 20 years. New home starts: According to Nanayakkara-Skillington, the seasonally adjusted annual rate for new single family home starts is 892,000, which is down 18.5 percent compared to last year. The forecast for mortgage rates and types
Mortgage interest rates could continue to increase for a few weeks or months, says Yun, adding that seven percent looks to be the level for the rest of this year and most of next year. Within two years, the rate should return to five-and-a-half or six percent, he adds. Nanayakkara-Skillington agrees, predicting rates will drop to about six percent by the middle of 2024. Because the rates are high, Yun foresees a greater interest in (ARMs) through next year. However, after that, he predicts 90 percent of Americans will return to the traditional 30-year fixed mortgage route. Greg McBride, CFA, Bankrate chief financial analyst, agrees, stating that the 30-year fixed rate mortgage will remain the dominant product. “It provides the certainty borrowers want, lenders can sell them to investors, and there is a vibrant secondary market of global investors eager to buy them,” he says. Predictions for home prices
Yun foresees zero or minor changes in purchase price tags on a nationwide basis next year, with increases or decreases of about five percent. The only exception is California, he says, where the market could see 10 percent declines: “Because , California is always the most vulnerable to changes in interest rates.” Overall, in five years, he expects prices to have appreciated a total of 15-25 percent. McBride has a similar perspective. He predicts home prices will average low- to mid- single digit annual appreciation over the next five years. This rate of appreciation, he says, is consistent with the long-term average of home prices increasing by a rate that’ hovers a percentage point above the inflation rate. Will the housing market crash
While it’s been showing bubble-like properties, Yun does not expect the residential real estate market to violently pop. Although he predicts that sales will be at a low point next year, with only 5.3 million units sold, he foresees a gradual increase afterwards, up to an annual six million units by 2027. Despite the higher mortgage rates, home prices are still above what they were one year ago, he adds. Even if they decline five percent (or 10 percent in California) next year, that’s not close to crashing — which is characterized by a one-third drop. “A 30 percent decrease will not happen because there isn’t enough inventory,” he explains. “A crash happens with oversupply.” He believes the housing shortage will continue this year, with the supply balancing out by five years. Will it become a buyer s market
Yun expects the seller’s market to continue, while housing inventory remains low. By five years, though, he foresees , where neither the buyer or seller holds sway. Instead, the negotiating power between parties will be more equal and depend on the individual case. Caroline Feeney, executive editor, HomeLight, feels the shift away from a seller’s market has already begun. According to a recent survey the company conducted, only 51 percent of HomeLight agents described their current local market as a seller’s market. She also expects a balanced market within a few years. Where and what sort of homes will be built
With hybrid work schedules becoming the norm and commuting no longer as relevant, Yun predicts the suburban market will continue to be strong. Meanwhile, 55 percent of top HomeLight agents believe the markets that heated up the quickest during the pandemic (including Austin, Phoenix and Boise) are likely to be and see the biggest decreases during a market correction, says Feeney. Yun expects growth in areas with rising populations, namely the Carolinas, Florida, Texas and Tennessee. Backing up his prediction, 50 percent of new single-family construction is in the South, notes Nanayakkara-Skillington. The number of under construction has decreased over the last four months. In contrast, the number of under construction has increased over the last few years, says Feeney, who credits this growth in part to their lower price tags — apartments tend to be cheaper than detached houses — and the pressure on municipalities to relieve shortages and provide more affordable housing. Still, with high mortgage rates and inflationary building material prices, Nanayakkara-Skillington expects the multi-family market’s growth to stabilize within a few years, with the number of new starts decreasing eight percent in 2023, and another five percent in 2024. Tips to save for a home
Since buying a home is such a major purchase, starting to save up five years in advance is perfectly reasonable. Here are some strategies to get your finances in shape — you want to be able to swing the usual 20 percent down, to avoid the extra cost of — and of course for mortgage pre-approvals. 1 Think about earning power
Of course you work for love, not money. But money’s important too. Figure out the right way to , or be willing to look for other opportunities — that’s usually the fastest path to a significant salary bump. Sixty percent of workers who switched jobs over the past year earned more money in their new roles, even accounting for the fast pace of inflation, according to a recent study from the . 2 Decrease your debt
Being able to purchase a home isn’t just about growing your bank account. It’s equally important to focus on paying down the amount of money you owe on credit cards, student loans and car payments. By lowering your , you’ll be in a better position to qualify for a mortgage down the line. 3 Keep hidden homebuying costs in mind
The purchase price is the big expense, but homebuying has other, . You’ll also need to be ready to pay — lender fees, property taxes, appraisal expenses and various other administrative and professionals’ fees. These add up quickly. In 2021, the were $6,905, according to . Because you’ll be spending several thousand on closing costs, it’s imperative to stay in a home long enough to break even (let alone make a profit). If you’re buying a home and you’re probably not going to come out ahead. Five years is the usual amount of time. 4 Focus on local not national markets
Yes, plenty of publications (including ours) are full of generalizations about “the housing market.” But real estate markets are hyper-localized, varying greatly not just from region to region, but from state to state, and even within states. Costs, prices and requirements are going to look much different in Pensacola than they will in Palm Beach, for example. As you think about , bear the broader national trends in mind, but it’s more helpful to focus on housing market conditions in the city and even the specific neighborhood where you’re looking to buy or move to. Try to target the , where your dollars will bring the most bang for the housing buck. SHARE: Dina Cheney Dina Cheney is a home and garden writer for Bankrate. A writer for 20-plus years, she’s contributed to publications including Good Housekeeping, Parents, Health, Men’s Health and SELF. Troy Segal is Bankrate's Senior Homeownership Editor, focusing on everything from upkeep and maintenance to building equity and enhancing value. Related Articles