They say that everything that goes up, must come down—but inflation has made that hard to believe last year. While not all the prices that went up in 2022 are expected to come down this year, some will. In 2022, inflation peaked in June at 9.1%, and has gradually been coming down since. Along with inflation, the Consumer Price Index (CPI), which measures the change in prices paid by consumers for goods over time, is still higher than it was in Nov. 2021 compared to Nov. 2022, but it has been increasing at a slower rate.
What this all means, according to experts, is certain products will see price drops in 2023. Here are some of the big ones you should be aware of.
Home prices will drop in 2023
According to the S&P/Case-Shiller index, which measures the value of single-family housing within the United States, home values peaked in June 2022 and has been declining for the following four months (the latest data available). According to Rick Newman, senior columnist for Yahoo Finance, the artificially increased mortgage rates from the federal government have sidelined potential home buyers, thus bringing home prices down.
Don’t expect price drops similar to the 2006 real estate bubble burst, which reached drops of 27%, according to Fortune. Prices have only fallen three percent after a 26% spike during the pandemic, according to Newman. Instead, Newman thinks a 10% drop in 2023 is possible.
Rent will drop this year
Similar to mortgages, rents are also expected to decrease in 2023 as the rising interest rates slow down the demand for property. According to Newman, the Zillow Observed Rent Index, which measures changes in asking rents over time, has dropped for two consecutive months from Sep. to Nov., and he thinks it’ll continue its decline in 2023. Like dropping house prices, don’t expect massive rent discounts. We are currently paying 25% higher rent than we were before the pandemic, and rents have only fallen half of a percent from last year’s peak. But you can expect the trend to continue.
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New cars
A microchip shortage in 2020 affected the production of many new vehicles, and the effects are still felt today. The average price of a new vehicle in the U.S. spiked during the pandemic to $49,000, according to Kelley Blue Book, and was up 6.3% in 2022 compared to the previous year. But there is some hope in 2023. “The semi-shortage is now easing,” Newman said. “There’s still pent-up demand for new cars, which means sales could stay strong during the first half of 2023, with prices moderating but not declining. By the second half of the year, however, there could be a glut of new cars, with prices falling back to more normal levels.” J.P Morgan expects a 2.5% to 5% decrease in 2023.
Used cars
The used car market reacts to the new car market. The more new cars there are, the more inventory for used cars there will be. Like new cars, the used car market was affected by the microchip shortage, with many of the people who could not afford the high prices of new cars during the pandemic trickling into the used car market and dwindling the supply. But as the new car market is expected to slowly improve, so is the used car market. Don’t expect it to recover to pre-pandemic levels until 2025, according to a report from Jerry, but it will ease a bit. According to the J.P. Morgan report, used-car prices are expected to drop 10% to 20% in 2023.