2022 is quickly coming to a close, making this the perfect time to forecast potential 2023 housing market trends! With mortgage rates escalating higher, home sales — and, in some areas, home prices — hitting the brakes, many homeowners, prospective sellers, and buyers are nervous about what next year’s market might bring.
And for good reason, considering that at the time of this article, homes are selling at the slowest rate in 10 years.
To help you make the best home financing decision possible, we’ve researched the top forecasts and predictions from industry experts on interest rates, housing sales activity, supply, and affordability in the new year. Read on for a general evaluation of what we could see happen in the 2023 housing market!
Will Mortgage Rates Continue to Rise?
This is perhaps the biggest question on the minds of prospective homebuyers and those looking to refinance. Interest rates now sit at nearly double their lows in early 2022, so it’s fair to assume that the cost of financing a home won’t be coming down much at the beginning of next year. But what about across 2023? Is there any light at the end of the tunnel?
It’s hard to say with the inflation rate, although slightly lower this month than last, as well as interest rates remaining high. There’s also the threat of a potential recession looming, which coupled with the record-high rates could force 30-year and 15-year mortgage rates up throughout 2023.
However, some industry professionals still have hope for relief. According to Senior Economist at Zillow Jeff Tucker, “If inflation convincingly cools down, and the Fed subsequently stops tightening monetary policy, we could see rates begin to ease back down. The best bet is that we continue to see mortgage rates in the ballpark of current levels, perhaps from 6.5% to 7.5%.”
Will Housing Sales Pick Back Up?
It appears that with the bleak outlook on interest rates and inflation, housing sales are expected to continue their downward slope. This seems to be the case for both new construction and existing properties. However, as higher interest rates and ongoing elevated construction costs continue to price out many prospective buyers, the single-family homebuilding industry will most likely experience an even sharper decline in 2023.
It is also possible that we will see the current days on the market average double or even triple, further slowing the market.
Will Home Prices Drop in 2023?
Simply put, housing prices drop when demand is met. Most industry professionals predict lower demand throughout 2023 and therefore lower prices, but due to low inventory it is unlikely that they will drop enough to make a big impact. However, because rates are projected to rise even higher, the value of homes on the market could take a hit.
This should provide some relief for buyers who have been waiting patiently to purchase a home. A few professionals in the industry even believe that we will see another buyer’s market emerge throughout 2023!
Will 2023 Be A Good Time to Buy?
Given the wide range of possible housing market scenarios and varying opinions for the coming year, it is difficult to say for certain if rates will go down enough to make 2023 a more ideal time to purchase a home.
Regardless, our team recommends that if you find a home that you love, and plan to make it your primary residence for an extended period–at least five to ten years–you shouldn’t try to time your purchase in conjunction with a more favorable mortgage rate.
A better strategy is to buy based on your finances and your needs. Understanding your credit score to see if there are ways to improve it and meeting with a lender, like 1st Securities Mortgage, to see what loans you qualify for will put you in a stronger position once you are prepared to purchase a home.
Taking a big picture look at the possible real estate market next year, most opinions are in consensus: 2023 will be something of a transitional year, characterized by uncertainty. It won’t be an easy market for anyone, but by mid 2023 we could possibly see it shift into a buyers’ market. As always, our team will continue to help you navigate this ever-changing market and will keep you updated on any changes.
Are you ready to begin your home financing journey? Click Here to connect with one of our skilled Loan Originators today!