Residential Real Estate Slowdown Expected To Continue in 2023

Rising housing costs and mortgage rates were becoming the norm in 2022. Experts anticipate that 2023 may show much of the same.

Apartment buildings with yellow haze
Headshot of male lawyer with brown hair wearing dark suit and white shirt

Mick Harris

February 7, 2023 01:00 PM

Affordability issues, including high housing costs and significantly increased mortgage rates, took a toll on the 2022 residential real estate market across the United States—and Oregon was no exception. Will the downward trend continue in 2023?

Real estate company Redfin says yes, the downward trend will continue. “Redfin expects home sales to keep falling through 2023, leaving housing companies to negotiate a ‘jungle’ of uncertainty longer than once anticipated,” according to Redfin CEO Glenn Kelman.

Redfin’s Deputy Chief Economist Taylor Marr specifically predicts: “Mortgage rates will take center stage in 2023, with high rates likely to make it the slowest housing-market year since 2011…We expect about 16% fewer existing home sales in 2023 than 2022, landing at 4.3 million, with would-be buyers pressing pause due mostly to affordability challenges including high mortgage rates, still-high home prices, persistent inflation and a potential recession…That’s fewer home sales than any year since 2011, when the U.S. was reeling from the subprime mortgage crisis, and a 30% decline from 2021 during the pandemic homebuying boom.”

A 2023 report by also concluded that housing will slow in 2023, even predicting that 2023 could become a “nobody’s market,” meaning it will not favor buyers or sellers. Typically, a declining residential housing market has a bright side. In fact, the real estate industry routinely calls such declines a “buyers’ market” because buyers have more leverage and can score a better deal on a home. Unfortunately, high mortgage interest rates increase the “cost of capital,” so a decrease in the price of a house does not translate to overall lower costs for mortgage-seeking homeowners.

Location tells a more specific story

Overall, pending home sales slid for the sixth consecutive month in November, according to the National Association of REALTORS®, largely due to increasing mortgage rates, according to NAR Chief Economist Lawrence Yun. All four U.S. regions recorded month-over-month decreases, and all four regions saw year-over-year declines in transactions.

The organization’s Pending Home Sales Index (PHSI) indicated the biggest drops were in the Westlargely due to affordability. According to the November index:

  • The Northeast index fell 34.9% from November 2021
  • The Midwest index fell 31.6%
  • The South index fell 38.5% from the prior year
  • The West index fell 45.7% from November 2021.

"The Midwest region—with relatively affordable home prices—has held up better, while the unaffordable West region suffered the largest decline in activity," Yun said.

For the Portland-Vancouver-Hillsboro market, predicts year-over-year 2023 sales growth to decrease by 10.7%. However, the latest December 2022 Redfin data indicated a still somewhat competitive Portland market. Home prices were down 1.8% compared to last year, selling for a median price of $500,000, in 37 days on the market, compared to 19 days a year ago. “There were 543 homes sold in December (2022), down from 1,032 last year,” according to Redfin.

In November 2022, according to the Redfin report, Portland home prices were down 0.095% compared to 2021, selling for a median price of $525,000 and staying on the market for an average of 27 days. In June 2022, Redfin reported Portland home prices were up 7.6% compared to last year, selling for a median price of $570,000, after an average of just six days on the market.

The Portland market is shifting quickly, but it is unlikely to experience a collapse. Portland is among the top-priced markets in the nation—which doesn’t bode well in a high mortgage-rate environment—but it is surrounded by even higher priced metropolitan areas, such as Seattle to the north and San Francisco or Los Angeles to the south. This makes Portland an appealing choice for buyers who want to live on the West Coast.

Mortgage rates and affordability predicts an average 2023 mortgage rate of 7.4%, which is up from the 2022 average of 5.5%. The report also predicts greatly increased availability, with existing homes for-sale inventory growing year-over-year to a forecasted 22.8%, up from just 4.0% in 2022.

Redfin has a somewhat brighter outlook on mortgage rates: “We expect 30-year fixed mortgage rates to gradually decline to around 5.8% by the end of the year, with the average 2023 homebuyer’s rate sitting at about 6.1%. Mortgage rates dipping from around 6.5% to 5.8% would save a homebuyer purchasing a $400,000 home about $150 on their monthly mortgage payment. To look at it another way, a homebuyer on a $2,500 monthly budget can afford a $383,750 home with a 6.5% rate; that same buyer could afford a $406,250 home with a 5.8% rate…With a 3% rate, which was common in 2020 and 2021, that same buyer could afford a $517,000 home.”

The January numbers from Freddie Mac show some rate stabilization, with the weekly average, as of January 12, 2023, for 30-year mortgages at 6.33%. However, the organization’s latest commentary comes with cautionary language: “While mortgage rates have resumed their decline, the market remains hypersensitive to rate movements, with purchase demand experiencing large swings relative to small changes in rates.”

Clearly, mortgage rates effectively price out some buyers, particularly in expensive markets.

Can policy changes influence affordability?

Policy choices have influenced housing costs for decades. A lack of public housing is one of the most visible aspects of the housing crisis, but it represents just the tip of the affordability iceberg. Many of our current housing problems can be found in policy shifts that began in the 1980s. After funding public housing for decades, President Ronald Reagan made draconian cuts to public housing. His 1986 budget was described as “…a complete abandonment of a 50-year bipartisan commitment to low-income housing.” These cuts, along with restrictive zoning laws, absurd permitting practices and a host of other regulatory issues priced out would-be homeowners at various economic levels.

Portland's supply is restricted, in part, due to its geography; extensive mountains and waterways mean that new construction is naturally limited. However, onerous policy choices have restricted supply even further.

That is why some cities are opening more building options by updating their zoning laws. The movement began in Minneapolis in 2019 and Portland has already joined in. The Portland City Council approved zoning rules changes in August 2022 that allow duplexes, triplexes and fourplexes in areas previously reserved for single-family homes. This increases housing density in previously zoned single-family neighborhoods.

Another opportunity involves converting commercial property into residential units. For example, COVID-19 emptied out many downtown high-rise office buildings and developers are scrambling to repurpose some of this space. Repurposing commercial space could help solve affordability issues and increase public housing options. However, a robust repurposing effort will require regulatory cooperation through the provision of tax incentives and adjusting zoning requirements.

Challenging times for residential real estate

Clearly, 2023 will be an interesting year for residential real estate across the nation. Affordability will continue to plague the most expensive markets, including the Portland metropolitan area. Open-minded approaches to increasing housing supplies, however, could ease some of the affordability burdens.

Mick Harris is an associate in Tonkon Torp’s Business Department with a practice focused on corporate governance, general business matters and real estate. Mick counsels startups, emerging growth companies and large-scale businesses on venture capital and angel financings, mergers and acquisitions, commercial agreements and more. In his real estate work, Mick assists clients in a wide range of title, finance, transactional, leasing and regulatory matters and has a specialty in land use and residential landlord-tenant matters.

Headline Image: iStock/Don White

Related Articles


Adam Leitman Bailey Saves Upper East Cooperative From Forced NYU Combination With Neighboring University Building

by Rebecca Blackwell

When a New York resident of an iconic building was faced with a potentially devastating renovation to his beloved home, powerhouse real estate lawyer Adam Leitman Bailey tightened the knot on the loophole others said didn’t exist.

Large brownstone building with blue sky above in New York City


How To Run a Board Meeting

by Adam Leitman Bailey

Adam Leitman Bailey explains how using Robert's Rules of Order can assist with effective and productive board meetings in real estate matters.

Several people sitting in chairs around boardroom table


The Wolf Near Wall Street

by Rebecca Blackwell

When tensions among shared real estate owners reached their tipping point, Adam Leitman Bailey P.C. stepped in and solved a modern issue with an ancient remedy.

Mortgage documents on desk

House Trap

by Heidi E. Storz

Special districts are often being used as profit centers that leave residents to foot the bill. These homeowners deserve protection from unscrupulous developers who attempt to fleece them and avoid accountability.

Special Districts Changing Property Ownership


How Long Can You Stay On Long-Term Disability?

by Michael Walter

Walter Law Group's team of long-term disability lawyers explains qualifications and coverage length for LTD.

Image of wheelchair accessible sign white on blue background

Rights and Wrongs

by Shannon Pierce

Antidiscrimination enforcement agencies, both federal and state, are likely going to be highly active in the next five years. Are Nevada businesses ready?

Faces of women overlapping in multi-color

Brace for Impact

by Ray Young, Jr. and Scott Hetrick

The 2021 independent contractor rule might have major impacts on employers and upend compliance issues, especially as the DOL’s definition of an independent contractor is about to change.

Silhouetted figure holding the hands of a clock

Withstand the Ban

by Jeffrey A. Calabrese and Kirby Black

With the recent Federal Trade Commission’s announcement proposing a complete ban on noncompete agreements, we offer advice to companies moving forward.

Figure out of frame signing a non-descript contract

Employers Are Budding Heads on Marijuana in the Workplace

by M. Tae Phillips and Melanie C. Cormier

As employment lawyers, we receive many questions from employers navigating marijuana legalization. Below, we answer the top three most asked questions.

Statue of Liberty holding a marijuana joint

Noncompete Extinct

by Mark W. Bakker

The Federal Trade Commission has proposed a blanket ban on noncompete agreements that could radicalize post-termination protections afforded to employers.

Dark figure walking up red staircase to open door

The Role of Flood Zones in Florida Real Estate Transactions

by Best Lawyers

Get a comprehensive understanding of flood zones in Florida real estate. Learn about the risks, insurance requirements and disclosure obligations.

Trees blowing in flood waters and storm

How Real Estate Transactions in the Residential Sector Work

by Best Lawyers

Discover how real estate transactions in the residential sector work with this guide. Learn about the stages, parties involved and legal requirements.

Man looking at houses on computer

The Top 7 Things to Know Before Filing for Divorce

by Best Lawyers

Consulting with a qualified divorce attorney can help you understand your rights and obligations when filing for divorce. Here are 7 things you should know.

Two golden wedding bands with a crack down the middle

5 Mistakes to Avoid In a Slip and Fall Lawsuit

by Best Lawyers

Learn how to avoid common mistakes during a slip and fall lawsuit. Report the accident, seek medical attention, gather evidence and speak to an attorney.

Yellow caution sign with blue wet floor background


Leadership and Commitment

by Justin Smulison

Malone Law leader and 2016 Medical Malpractice Law – Plaintiffs “Lawyer of the Year” Adam Malone discusses how his success transcends the courtroom and helps strengthen public and legal communities.

Suited man standing with arm resting on table

"Lawyer of the Year"

Woman with suit and blonde hair smiling

Heather Clauson Haughian

Privacy and Data Security Law

Atlanta, GA


Trending Articles

The Best Lawyers in South Africa™ 2023

by Best Lawyers

Best Lawyers proudly announces lawyers recognized in South Africa for 2023.

South African flag

Announcing the 2023 The Best Lawyers in America Honorees

by Best Lawyers

Only the top 5.3% of all practicing lawyers in the U.S. were selected by their peers for inclusion in the 29th edition of The Best Lawyers in America®.

Gold strings and dots connecting to form US map

Best Lawyers Voting Is Now Open

by Best Lawyers

Voting has begun in several countries across the globe, including the United States, the United Kingdom and Europe. Below we offer dates, details and answers to voting-related questions to assist with the voting process.

Hands holding smartphone with five stars above phone

Best Lawyers: Ones to Watch in America for 2023

by Best Lawyers

The third edition of Best Lawyers: Ones to Watch in America™ highlights the legal talent of lawyers who have been in practice less than 10 years.

Three arrows made of lines and dots on blue background

Announcing The Best Lawyers in Australia™ 2023

by Best Lawyers

The results include an elite field of top lawyers and firms from Australia.

The Best Lawyers in Australia™ 2023

Announcing the 2023 The Best Lawyers in Canada Honorees

by Best Lawyers

The Best Lawyers in Canada™ is entering its 17th edition for 2023. We highlight the elite lawyers awarded this year.

Red map of Canada with white lines and dots

Famous Songs Unprotected by Copyright Could Mean Royalties for Some

by Michael B. Fein

A guide to navigating copyright claims on famous songs.

Can I Sing "Happy Birthday" in Public?

Could Reign Supreme End with the Queen?

by Sara Collin

Canada is revisiting the notion of abolishing the monarchy after Queen Elizabeth II’s passing, but many Canadians and lawmakers are questioning if Canada could, should and would follow through.

Teacup on saucer over image of Queen's eye

Rising Transfer Taxes

by Angus C. Beverly

Transfer taxes in California are becoming a statewide trend with potentially national implications. Here is a breakdown of the effects in several cities.

State of California in orange with city in backdrop

What the Courts Say About Recording in the Classroom

by Christina Henagen Peer and Peter Zawadski

Students and parents are increasingly asking to use audio devices to record what's being said in the classroom. But is it legal? A recent ruling offer gives the answer to a question confusing parents and administrators alike.

Is It Legal for Students to Record Teachers?

The Upcycle Conundrum

by Karen Kreider Gaunt

Laudable or litigious? What you need to know about potential copyright and trademark infringement when repurposing products.

Repurposed Products and Copyright Infringemen

Caffeine Overload and DUI Tests

by Daniel Taylor

While it might come as a surprise, the over-consumption of caffeine could trigger a false positive on a breathalyzer test.

Can Caffeine Cause You to Fail DUI Test?

Wage and Overtime Laws for Truck Drivers

by Greg Mansell

For truck drivers nationwide, underpayment and overtime violations are just the beginning of a long list of problems. Below we explore the wages you are entitled to but may not be receiving.

Truck Driver Wage and Overtime Laws in the US

Best Law Firms® Research Has Begun

by Best Lawyers

Best Law Firms® rankings are annually produced awards recognizing the top law firms across the United States. We are here to offer insight into the submission process for all eligible firms.

Black background with colorful squares and faces

Choosing a Title Company: What a Seller Should Expect

by Roy D. Oppenheim

When it comes to choosing a title company, how much power exactly does a seller have?

Choosing the Title Company As Seller

Thirteen Years of Excellence

by Best Lawyers

For the 13th consecutive year, “Best Law Firms” has awarded the most elite and talented law firms across the country through a thorough and trusted data review process.

Red, white and blue pipes and writing on black background