Buying a Home in 2023
Expect the housing market in 2023 to look different from the highly competitive housing market of the past two years. Some predictions include a gradual drop in home prices, high-interest rates, and a switch to a buyer’s market.
Buying a home is a significant financial commitment, regardless of the market conditions. But after a record-setting rise in home prices in 2021 and 2022, and mortgage interest rates rising to the highest mark in two decades, there are a few things for prospective homebuyers to keep in mind for 2023.
While the housing market can vary significantly based on location, it can be helpful to know about general expectations to consider as you prepare to hunt for a home.
Mortgage Rates May Stall or Continue to Rise
As of October 27, 2022, the average interest rate for a 30-year fixed-rate mortgage was 7.08%, according to Freddie Mac, the highest it’s been since 2002. Mortgage rates are driven by a number of factors, including inflation.
In 2022, the inflation rate has reached levels the country hasn’t seen since the early 1980s, and it’s uncertain where rates will go in 2023. But other factors, such as the Federal Reserve’s monetary policy and housing market conditions, also have an impact on home loan rates.
As a result, it’s difficult to say exactly how mortgage rates will behave. According to Fannie Mae’s October 2022 housing forecast, the government-sponsored enterprise expects mortgage rates to fall slightly to 6.6% by the first quarter of 2023 and continue a steady decline to 6.2% in the fourth quarter. Other analysts predict higher rates. To limit your exposure to increasing interest rates, consider locking in a rate quickly and possibly even paying a fee for a longer rate lock period, if necessary.
Your best bet for securing a low-interest rate, though, is to shop around for a loan, improve your credit, lower your debt-to-income ratio and make a large down payment. You can also consider an adjustable-rate mortgage (ARM), but understand the differences between adjustable-rate and fixed-rate loans before you apply.
Home Prices May Drop
As interest rates have risen throughout 2022, home sales have seen a sharp decline. Fannie Mae has forecasted that total home sales will reach 5.64 million in 2022, an 18.1% drop from 2021; in 2023, that figure is expected to decline again to 4.47 million, a 20.7% decrease from this year.
As a result, Fannie Mae expects home prices to fall, but only by 1.5% nationwide. Other analysts expect a more dramatic drop, with Goldman Sachs suggesting that home prices may decline by 5% to 10% in the coming year.
Of course, housing price movements can vary greatly by location, so it’s important to speak with real estate experts in your area to get an idea of what to expect.
While home prices are an important factor for homebuyers to consider, it’s also crucial that you consider how interest rates can impact your monthly payment. If you wait too long, hoping that prices will go down and interest rates will continue to increase, buying a home could become unaffordable.
Crossland Title Inc. is a Knoxville title agency providing full-service real estate title solutions. Crossland Title Inc. makes your closing seem effortless.
With more than 38 years of experience in the real estate and title business, owners Pam Rice and Beth Crox have built their reputations upon the virtues of personal service and integrity. They believe that reputation as an honest and reliable business is the recipe for success.