Five reasons why we won’t see a housing market crash in 2023

The affordability crisis is going to play a significant role this year

The housing market has been on a rollercoaster the past few years, with no shortage of news about record-high prices, outrageous negotiations, like all-cash deals and cars, and questions about whether there’s a bubble and if so, whether it’ll burst.

The pendulum swung from a buyer’s market to a seller’s market as a result of the pandemic changed people’s behaviors. Families started feeling cramped after sheltering in place for more than a year, global supply chain issues picked up, and the formerly low interest rates began climbing.

While we’ve seen the stark rise in home prices flatten a bit compared to 2022, this downturn won’t fully correct itself and return us to pre-pandemic levels. 

For example, the most recent Case-Shiller Home Price Index, a leading indicator of U.S. residential real estate prices, showed that March 2023 home prices were 2% higher than March 2022. It’s worth noting that seasonality plays a role here too, so we see some prices slightly lower given the time of year the stats are based on.  

So yes, we’re still in an affordability crisis, and it’s unlikely to lead to a complete housing market tumble in 2023. Here’s why.

1. Homeowners are reluctant to sell

We’ve seen this anecdotally, as homeowners come to Splitero to access their home equity instead of selling. Now the data is out. The March 2023 U.S. existing home sale volumes were down 22% compared to March 2022, according to the National Association of REALTORS.

Homeowner motivation is low when it comes to selling because many are locked into low-rate mortgages and don’t want to give up that rate to sell and repurchase a more expensive home with a higher mortgage rate.

With affordability at an all-time low, homeowners are instead finding ways to access their home equity for renovation projects to make their homes better suit their needs. Homeowners are also using their increased equity to pad retirement and savings accounts, pay off high-interest credit card debt, and supplement living expenses as inflation grows. 

A graph showing  March 2023 U.S. Existing Home Sale volumes are down 22% compared to March 2022Source: Mike DelPrete

2. Credit availability is exceptionally tight, and regulators removed faulty financial products 

The housing market is expected to stay strong, mainly due to the current limited credit availability. This is a significant contrast to the situation in 2008, where obtaining loans was considerably more accessible for borrowers.

During that time, several unsafe mortgage products enabled individuals with low credit scores to qualify for loans, but those have since been eliminated from the market. The 30-year fixed mortgage is the primary product, providing a more stable option for borrowers and lenders.

Mortgage Credit Availability Index

Source: Mortgage Bankers Association

3. Mortgage delinquency rates are low

Overall rates of mortgage delinquency — when a homeowner is late on a required mortgage payment — are also low. This is because lenders aren’t lending to borrowers with low credit scores. They’re only lending to those with a pristine credit score, related to the point above regarding less risky financial products on the market.

This means the quality of the loans is better than before, which directly correlates to default rates.  

Mortgage DelinquencySource: FRED – Federal Bank of St. Louis

4. Home equity is at an all-time high, which means foreclosures aren’t coming

Homeowners have an incredible amount of home equity compared to 2008, putting them in good financial shape and allowing them to sell their property for a profit. According to CoreLogic’s Home Equity Report, individuals with outstanding mortgages in the United States experienced a 7.3% year-over-year rise in equity during the fourth quarter of 2022.

Data from Yardeni Research shows a record amount of $29.6T of home equity in the U.S. 

This accumulated home equity is helping homeowners avert foreclosures. Distressed sales – which is foreclosures and short sales – represented 1% of sales in January, identical to last month and one year ago, according to the NAR

5. The housing market is starved for inventory 

Over the last few years, the increasing demand due to lack of inventory has been one factor driving home price appreciation. Back in 2008, during the housing crisis, many tiny home builders went out of business, and new builds plummeted. New builds started to pick up again, but the global supply chain shortage increased the cost of construction materials like wood and slowed the progress.

New home listings are still low, according to’s March Housing Trends Report, which showed new listings were down about 20% year over year. New listings still lag behind pre-pandemic levels between 2017 and 2019 by almost 30%.

A graph showing new listings were down about 20% year-over-year in March 2023
Source: March 2023 Housing Trends Report

However, we have seen builder sentiment rising.

What needs to happen for prices to plummet

Since the real estate market is starving for inventory, there’s significant pent-up demand. We will unlikely see home price appreciation slow with a single factor like interest rates. Inflation, affordability, interest rates, supply, and other factors will likely need to combine over the year to make home prices drop.

What will happen in 2023?

The housing market sentiment is growing, especially in home equity investments. We’ve seen cautious optimism from institutional REITs adding HEIs to their portfolios.

We’ll continue to see homeowners accessing their home equity to pay off high-interest debt, start renovation projects, or pad their savings and retirement accounts. We’re seeing homeowners looking to access their built-up home equity to gain financial freedom with no additional monthly payments and no new debt while the housing market remains hotter than normal.

Michael Gifford is the CEO and co-founder of Splitero and a career real estate expert who witnessed firsthand the lack of resources available to homeowners when they most need to access the value trapped in their home equity.

Splitero is a financial technology company that provides homeowners better options to access home equity. By giving a lump-sum of cash in exchange for a share of their home’s appreciation, Splitero helps homeowners easily access their equity without income or credit score requirements. Founded by real estate veterans, Splitero has secured more than $1 billion in total financing to help homeowners access their equity.

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