Are you unsure of what to expect from the housing market in 2023? Experts predict that buyers will have more leverage in 2023, and they also predict a turnaround of the entire market as we head into 2024.
As a homeowner, however, it’s hard to relax if you’re worrying about what the housing market might look like this coming year despite those hopeful predictions. You may have questions such as: Will mortgage rates continue to increase? What about foreclosures?
Sit tight as we delve into all of this and more about the expected stability of the housing market for 2023. Be sure to stay tuned until the end, when we’ll give our expert opinion of whether you should buy, sell, or hold off from all things housing related in 2023.
Unless you’ve been living under a rock, you’ve likely heard about and experienced issues related to increasing inflation and interest rates. And you likely know how this has affected the housing market in the past couple of years. Just what kind of real estate market are we looking at in 2023?
Before we dive into four specific factors to keep an eye on, let’s recap how the 2022 housing market shaped the current market.
The housing market in 2023 is still uncertain as it felt the impact of skyrocketing interest rates throughout most of 2022. Mortgage rates have been steadily dropping since December, making housing more accessible for some people. However, many economists remain divided about whether home prices will continue to decline or stay the same throughout 2023.
With high inflation levels, rising interest rates, and economic volatility (due to both natural and geopolitical uncertainties) causing uncertainty in the market, housing experts are keeping a close eye on housing prices. Nonetheless, there are signs that the housing market could be heading toward correction this year.
Most experts seem to predict a full rebound and recovery by 2024. However, that is likely dependent on the factors below.
We can expect mortgage rates to remain relatively low if inflation continues to slow in 2023. In a recent interview with Forbes, one senior economist from the National Association of Realtors (NAR) predicted mortgage rates at 5.2% by the end of the year.
However, regardless of inflation, most experts seem to agree that we should see mortgage rates dip below 6% by the end of the year.
The housing inventory situation has been an ongoing challenge since the housing crash of 2008. If you’ve been keeping up, you’ll know we haven’t fully recovered from that housing inventory crash.
What’s that mean for the current housing market? The combination of high demand and low housing stock has caused housing prices to remain far higher than before the crash. Robert Frick, a corporate economist at Navy Federal Credit Union, says that in December 2022, we saw lower sales, lower inventory, and higher prices come together.
Currently, housing inventory is only a 2.9-month supply. This is up from 1.7 months in 2021 but down from 3.3 months in November. Unfortunately, it could be many years until real estate supply meets demand. This isn’t something we predict improving in 2023 or even 2024.
Will housing prices drop in 2023? They might, but not by much. With experts predicting lower buyer demand, home prices may not look as rosy as we hoped. Rates have increased, pushing would-be buyers to the side and creating a shortage of available home options. Overall, growth is incredibly slow.
It’s unlikely that home prices will plummet as they did during the recession of 2008, but that doesn’t mean there won’t be an impact. Fortunately, some real estate experts suggest that the housing market might continue to outperform pre-pandemic levels, which could relieve the home-buying process. For now, we’ll have to wait and see what happens.
We've barely rebounded from the 2020 pandemic-caused recession, and expert economists are already predicting a potential next recession in 2023. Don't worry; nobody expects it to be as bad as the 2020 recession or 2008 one, either. However, what can you expect in the coming months?
With the labor market cooling down, wages remain steady, and housing and new construction expenses are declining. However, this isn't exactly a cause for celebration. Bloomberg's survey of economists put the probability of a recession happening in 2023 at 70%, a startling rate that highlights how unstable our economy has become.
Unless regulatory boards take action soon, it looks like we'll be in for an uncomfortable year or two.
No, what we’re looking at is more of an affordability crisis versus a housing bubble crash like we saw in the early 2000s.
To help put this in perspective, it's helpful to understand that a housing crash is personified by a 20% to 30% drop in home prices. This often occurs when housing prices grow much more rapidly than the underlying incomes of people living in the area, and an imbalance emerges that causes buyers to become scarce.
This can set off a spiral as sellers become desperate, further driving down housing prices until they eventually reach unsustainable levels. In essence, housing crashes are caused by inflated housing prices, which then cause buyers to have difficulty affording property, leading to sellers' acceptance of lower offers just to be rid of their burden.
We're looking at a potential 5% drop in house prices by the end of 2023. So, nobody (at least not right now) expects a full housing crash.
It depends on where you live. Here's what to consider.
House prices remain high. With rising mortgage rates, it can be difficult to buy a house. However, several factors make this an opportune moment for those who carefully plan their purchase.
Currently, homes on the market are staying longer, and competition among buyers is waning in some areas, which could create more buying power if you're financially equipped. On top of that, the cost of living is skyrocketing, so having a fixed mortgage rate may give you an advantage in the future.
Although buying a house may not seem like the best investment right now, an informed buy can be a wise choice if you're prepared for it. In the end, we'd suggest waiting until the end of 2023 to see how inflation and the global economy change. From here, 2024 looks like a better time to buy and sell.
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