The New Year is in full swing, and that means the winter season for real estate housing markets is now in full effect. Yet unlike many other years past, there are some important new developments in the housing sector that all real estate professionals need to pay attention to. Here’s how the winter housing market is shaping up and what this means for the rest of 2023.
First and foremost, it's increasingly likely that mortgage rate hikes will begin leveling off in the near future. Since 2022, the US Federal Reserve has been hard at work attempting to curb inflation through their primary tool of raising the US base interest rate, and this has indeed driven mortgage lending costs considerably higher than when they were in the past. The result of this has been prospective homebuyers not being able to afford mortgages as large as they would have prior to March of 2022. This has had a ripple effect on the entire housing market, and as a result, some of the demand for the highest-priced properties in many locales has declined in response.
The Fed is still raising rates, with one of the most recent coming at the beginning of February 2023. Yet even as rate increases are still ongoing, this latest interest rate hike was the most modest in 11 months at just 0.25 percent. While the Fed has indicated that some additional rate increases may be in the works, the fact that this latest one was much comparatively lower is could indicate that the worst of the mortgage rate hikes are behind us. This spells possibly good news for the winter housing market; with mortgage costs equalizing, house hunters are likely to be more comfortable taking out lending, and this could help bolster any flagging demand.
Truth be told, the stabilization of mortgage rates couldn't come at a better time. New research into the housing market by CoreLogic, as sponsored by Fortune magazine, found that there's likely to be a year-on-year decline in housing prices in a massive proportion of the housing market. Based on the analysis of dozens of different data points, the new report found that, in 391 markets of the 392 markets it examined, there's more than a 50 percent chance that year-on-year home prices will decline by November of 2023.
It's clear that such a price drop won't occur overnight, so that's relatively good news for house sellers looking to put their properties up for sale during the winter. However, this data is a clear indication that the housing market is due to go through a fundamental shift - and that shift is starting during the winter months of 2023. If property owners want to get top dollar from the sale of their homes, they must be impressed that it's time to strike while the iron is hot or risk losing out on returns through opportunity cost. As mortgage rates are indeed about to stabilize, or at least begin to do so, this simply reinforces the importance of getting homes up on the market now.
The trends outlined above are poised to have a major impact on the housing market for the coming year. While the total impact is unlikely to reach its full potential until much later, understanding what the future is going to hold is invaluable for real estate professionals, as this provides plenty of time to strategize and prepare. Additionally, these trends are starting now, which means that it's likely that housing markets will begin to transition shortly - i.e. during the winter housing period. In other words, the time is now to begin formulating plans for how to approach the housing market instead of being taken by surprise.
Real estate agents can capitalize on this advance warning by adjusting their approaches to clients. For agents working with sellers, it's essential to impress upon your clients that hesitation is a dangerous game. Waiting on listing a property or reconsidering an offer that might be slightly lower than what they wanted to sell their home for could be disappointing if, once the winter season is over, their prospects worsen. Meanwhile, buyers are likely to be in the opposite scenario; housing market prices are poised to decline slightly over the year, and mortgage rate hikes are beginning to stabilize. Counseling patients for house hunters could lead to benefits like reduced costs later in 2023.
No matter if you're a real estate professional who deals primarily with buyers, with sellers, or has a balanced mix of the two, the winter housing market has more than its fair share of surprises in store for you. Mortgage rates, which have been rising for nearly a year straight, are finally starting to show signs of leveling off. Meanwhile, though there's no indication that there will be a housing price freefall there's strong evidence that most housing markets are likely to decline at least slightly over the next six to nine months. Both events are already beginning, during the winter housing market season, or are poised to begin shortly.
Either way, these developments have a high likelihood of having an impact on your clients. Keep these events in mind as you continue to create your own business strategies for the winter housing market so that you're not caught unaware. Doing so will result in you finding yourself poised to react with more flexibility and agility in the future, creating a wider range of possibilities for the growth of your own success within the real estate sector. It's impossible to know for certain what the final impact of these trends will be, but hoping for the best goes together with preparing for the worst!