What to Expect from the Housing Market in 2023

After several years of a sellers’ market, the 2023 housing market could begin to feel like nobody’s market. In order to begin to predict what the housing market will look like, we have to take into consideration the effects of inflation and rising mortgage rates, the housing supply, home prices, and rental demand – just to name a few.

What Will Happen to Mortgage Rates?

Market experts agree this year is going to be focused on inflation. If inflation remains high and the Federal Reserve(Fed) continues to increase interest rates, mortgage rates will remain high as well. If inflation continues to decrease, mortgage rates will follow. 

1. There are a few things that could happen depending on how the Fed plans to deal with inflation. If inflation continues to remain high and the Fed continues to raise interest rates repeatedly, which means mortgage rates will continue to rise. 
2. If inflation begins to subside slowly due to the already high-interest rates, mortgage rates will stabilize for the year.
3. If the Fed decides to raise interest rates to help curb inflation, the economy has the potential to fall into a recession. This could cause a 2% or more drop in mortgage rates.

While these are all “what-if” situations and depend largely on the decision the Federal Reserve makes as well as inflation, they are all things to take into consideration that will help predict the outcome of the 2023 housing market.

What Will Happen to Home Prices?

Home prices are always defined by the supply on the market and the demand for homes. When there are more buyers and fewer homes on the market, the more home prices will rise – and this is exactly what we have seen the past few years due to the pandemic. 

As of January 2023, the overall housing supply remains limited. Those who were able to purchase a home in the past few years with extremely low mortgage rates are not looking to sell. The low inventory on the market is keeping prices from decreasing and, along with the high mortgage rates, pricing many buyers out of the market.

For many first-time home buyers, especially, 2023 may be considered a delayed dream with homes on the market exceeding their potential budget. With fewer and fewer potential homeowners making a purchase and more considering renting, this year could result in a high rent rates as well. 

If we follow the scenario where inflation pressure eases, we could potentially see a meaningful decrease in mortgage rates this year. While this could bring more potential buyers back into the housing market and relieve some of the strain, it may only be minimal. If we follow the scenario where home prices do begin to fall but mortgage rates remain high, the impact will likely cancel each other out by keeping monthly mortgage payments high and continuing to price potential buyers out of the market. 

When Is the Right Time to Buy a Home?

When it comes to buying a house, regardless of the market situation, it is a personal decision. A large purchase of a mortgage depends solely on the financial position of the potential buyers. One way to determine if now is the right time to purchase a home is with a mortgage calculator. A mortgage calculator will help you estimate your monthly housing cost based on a downpayment and interest rate.

If you’re trying to predict what will happen next in the market before you make your decision, you may end up disappointed. Instead of waiting for the price of homes to go down, consider your financial situation, your budget, and your overall housing needs. If you find a home you love in an area you love and it fits in your budget, then buying a home now may be the right decision. 

Bottom Line

The overall slowdown of the housing market is expected to continue throughout 2023. Listings are no longer going to be sold within a few days with days on the market continuing to climb back to normal levels.

The 2023 housing market is going to be defined by mortgage rates. If interest rates remain where they are, mortgage rates won’t move much. If this occurs, we can expect that most homeowners are not eager to sell. Additionally, if homeowners are staying put, we may also see a rise in home equity loans or home equity lines of credit for those who are looking to remodel.

If you think now may be the time for you to purchase or sell your home, reach out to a trusted realtor who has a grip on the market! Contact me today to learn more!