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Is the Real Estate Market Slowing, or Is This a Housing Bubble?



Rising mortgage rates are slowing an overheated real estate market, fueling fears of a housing bubble in the next year. In the last two years, housing prices have risen at an unsustainable rate, leading many to wonder whether a crisis is coming.


This question has two parts—first, the housing market change. Second, experts' predictions for next year's housing prices.


The Reality of the Shift in Today's Housing Market

We're at a housing supply-and-demand turning point. Realtor.com says active listings are up 26% from last year, while showings are down 17%. (see graph below). In the last two years, we've seen a large demand (showings) and not enough properties for sale to meet demand. That caused the market frenzy.


Today, supply and demand are different, and the market is slowing. This shows the delay many are experiencing.


Experts' predictions for next year's home prices

Most analysts predict house price appreciation in 2023, although considerably slower than the prior two years. Six experts predict national house prices will rise 2.5% next year. Only one of the six is calling for home price depreciation.



Considering the trend and what experts say, we may infer that the national real estate market is declining but is not a bubble. Some hot areas may decline in house prices, but a nationwide housing bubble is unlikely.


As a result of the slowdown in the real estate market, many people are concerned that we are now seeing a housing bubble. Over the previous two years, the housing market has been characterized by historically high demand levels coupled with minimal supply. Because of this, the value of properties increased at a rate that broke all previous records. According to industry analysts, despite the possibility that prices in certain hot markets could fall soon, it is expected that the value of real estate on the national level will rise in the next year.



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