A Reuters poll conducted between February 27 and March 17 showed that home prices in the United States are expected to rise modestly, by 1.8% in 2023 and 2.5% by 2027—both below the anticipated inflation rate.
The market continues to struggle with high mortgage rates and a shortage of affordable homes, limiting its ability to support the slowing U.S. economy. Mortgage rates, which have reached 6.2% for a 30-year loan, are expected to remain elevated, reflecting ongoing concerns about inflation and the impact of global conflicts.
Since the COVID-19 pandemic, home prices have surged by more than 50%. However, they recorded their weakest performance in 14 years last year, with growth not exceeding 1.4%. Existing home sales also declined to 4.1 million units at the start of 2023, far below the peak of 6.6 million units in 2021.
Experts such as James Knightley of ING attribute the slow recovery to affordability constraints and limited supply. Many homeowners remain reluctant to sell to retain the low-interest mortgages they secured during the pandemic.
A weak labor market and increased economic caution are further dampening housing demand, as consumers face high inflation and limited job opportunities. Mortgage rates are expected to stabilize around 6% through 2028, with the possibility of rising to 7% if geopolitical tensions persist.
On the supply side, the United States needs to build an additional 2.5 million homes to meet current demand. Analysts estimate that closing this gap could take more than five years. Despite slight improvements in the construction sector, tariffs on raw materials, labor shortages, and wage pressures continue to drive up costs and constrain growth.
