Have you ever missed out on something you really wanted? I watched a live craft supplier show the other day, and if I spent at least $20 (easy!), I would get a free rubber stamp set (and it was cute!). I'm in! I spent just over the required amount and placed my order. As I continued listening to the video, I learned the minimum was actually $25. What?! I frantically wrote an email asking if I could add to my order. Nope. "You can start a new order, and if any freebies are available, you'll get one." I quickly put together another order, only to learn that the freebies were all gone. I missed out on a good deal and was so disappointed. Switching gears to the housing market, have you been disappointed by it? Were you unable to buy a house this year? 😒 Let's take a look at what's being predicted for the housing market in 2023.
- Housing Bubble
- Mortgage Rates
- Housing Inventory
- Housing Market
- Home Sellers
- Work From Home
- New Construction
- Housing Affordability
- Changing Markets
- Government & Housing
I can only imagine the disappointment renters felt this year as mortgage rates increased and fewer houses were listed for sale. Renters had to put their dream of owning a home on hold. Sometimes life and the pursuit of owning a house can be discouraging. So, what can we expect from the housing market in 2023? Let's look at what Windermere Chief Economist Matthew Gardner predicts in his latest housing report for 2023.
Housing Bubble
If you follow the housing market news, you've heard rumors of a housing bubble. Matthew predicts there will be no housing bubble in 2023. You can continue to play with the kid's bubble-blowing kit, though (so fun)! He expects housing prices to continue dropping, especially toward the end of 2023. Unfortunately, home prices might still be as high, if not higher, than pre-pandemic prices.
Mortgage Rates
Saying goodbye to grandma at the airport is always tearful, like saying goodbye to a 3.25% mortgage rate (we'd like to see you again soon!). Matthew predicts that mortgage rates will stabilize and drop near the end of 2023 but doesn't expect pre-pandemic rates. Mortgage rates will likely fall 2% lower than the historic long-term interest rate, meaning the high end of 5% (5.65?). He also predicts the likelihood of a recession in 2023. Start saving for a down payment so you're prepared to make an offer on a house next year when mortgage rates are lower.
Housing Inventory
If you expect a significant increase in the number of houses going up for sale in 2023, you may be disappointed. Matthew predicts housing inventory will be stagnant in 2023. 2020-2021 home buyers and those who refinanced their homes at low rates are staying put and are unlikely to sell their houses for many years. Don't drop your ice cream cone and run off crying; houses will always be for sale as people move for new jobs, divorce, and move with the military. All the more reason to keep in touch with your real estate agent to stay abreast of houses that hit the market in your price range.
Housing Market Balance
Some experts in real estate predicted that we would be in a buyer's market by now. A buyer's market is when there are a lot of homes for sale but not many buyers, which keeps down the prices of homes. Matthew predicts a more balanced housing market vs. a buyer's market for 2023. There will be demand to buy houses, but it may be low.
More Realistic Home Sellers
Home sellers could price their homes high during 2020-2021 because there was so much competition among home buyers taking advantage of low mortgage rates. With higher mortgage rates and lower affordability limits staring us down, most buyers will reject higher-priced homes. Matthew predicts that home sellers will be more realistic with their pricing in 2023, making homes more affordable for buyers.
Work From Home
Many economists predicted that work-from-home employees would be back in the office by now, but that's only the case for some workers. While some employees are back in the office part-time, others are waiting to hear if they'll have to return to office work in any capacity. Because of the option to continue to work from home, many employees may choose to search for a home to buy, and it may be further from the office. Matthew predicts that other buyers may wait until the end of 2023 to buy houses, as mortgage rates are expected to be much lower.
New Construction
Although there is a need for newly built houses, there are still supply chain issues and high development costs. New construction activity is down 17% year-over-year. According to Matthew, the cost to build a new house vs. what buyers can afford will decrease the demand for new construction. It's unlikely that we will see a considerable increase in new construction activity in 2023, so expect fewer new houses for sale.
Changing Housing Markets
In 2020-2021, many areas of the U.S. saw incredibly high sales (ex., Mountain west states). On the other hand, popular metro areas on the East coast and in the Midwest are seeing home price increases. Matthew predicted that areas with high-priced homes will begin to stabilize and result in less home buyer demand in 2023. In addition, those looking to buy homes in 2023 will be less likely to compete with investors and out-of-town buyers. That's like having a whole pizza to yourself!
"Median home price growth has slowed the fastest in Austin, Phoenix, and San Jose, with fellow COVID-19 pandemic boomtowns Las Vegas and Boise, also seeing significant slowdowns." Inman
Housing Affordability
Will houses become more affordable across the U.S. in 2023? According to Matthew, home affordability will continue to be a major issue in 2023. If you're concerned about being able to purchase a home, talk to your real estate agent. Your agent can help you determine how much you can afford to spend on a house in the upcoming year and how much you need to save for a downpayment.
Government and Housing
Matthew predicts that the government will take housing more seriously in 2023. With demand from Gen Z and some millennials, more housing opportunities need to be developed to satisfy these groups. Right now, there is not enough land to build on, so the government needs to address other options, like building up vs. out. That means changes to how land is used for home building. For example, instead of a single-family home on a spacious lot, the same property could be used to build multiple smaller or attached homes. We'll have to wait and see how fast the government addresses the concern for more housing in the upcoming years to make it easier for you to find a home to purchase.
Conclusion
So many interesting predictions in the housing world! Whether this is your first, second, or third time purchasing a home, talk to a real estate agent about your local housing market. The more you know about housing in your area, the better prepared you'll be to purchase a house in 2023 when mortgage rates are down. We wish you the best as you prepare to buy a home! If you need help finding a local real estate agent, don't hesitate to get in touch with us at info@reazo.com.
