2023 Housing Market
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.
Home Prices Will Probably 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.
Supply May Remain Low
For the past couple of years, buyer demand has exceeded the supply of homes, resulting in price increases at a blistering rate. Wells Fargo economists don’t expect supply to grow by much in 2023.
That’s because 85% of homeowners in the U.S. currently have an interest rate under 5%, according to a Redfin analysis, many of whom likely took advantage of the refinance boom in 2021. With interest rates going up and little certainty about where they’ll land next year, homeowners don’t have much of a financial incentive to sell.
Additionally, homebuilder confidence hit its lowest level since 2012 October, according to the National Association of Home Builders, and the organization expects new construction to continue to decline in 2023.
If you currently own a home, have a relatively low-interest rate, and don’t have a pressing need to sell, it may be worthwhile to remain where you are until conditions begin to lean more in the seller’s favor. While it’s uncertain how long the current interest rate environment will last, you could save money by staying put.
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