The last few years have been crazy for the housing market. If you are thinking about buying or selling in the new year, you’re probably feeling a little nervous about the process.
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There’s no way to know exactly what challenges you’ll face, but you want to be as prepared as possible. GOBankingRates spoke to several real estate experts to find out what the housing market could look like in 2023.
Buyers will have leverage
“The market has shifted to a more buyer-friendly market, but sellers still have a lot of cards,” said Lindsay McLean, co-founder and CEO of HomeLister. “As mortgage rates rise and affordability declines, sellers may need to adjust their expectations to adjust to changing market conditions – and buyers [will] have more weight. »
Despite this, she said the market would return to a more balanced position than in previous years.
“Buyers are finding they can buy again without giving up contingencies, and sellers are starting to offer concessions,” she said. “However, many sellers hold low interest mortgages and are not under pressure to sell and can therefore wait for the offers they want.”
House prices could drop
The housing market has changed significantly, but McLean said it’s still unclear whether that means house prices will fall in 2023.
“Although prices have fallen from their peak at this time last year, they are still above 2021 prices in many markets,” she said. “Mortgage rates stabilized a bit in December and supply activity appears to be picking up as buyers slowly return to the table.”
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Inventory will increase
Right now, McLean said, the number of active listings — that is, inventory — is everywhere.
“In some places they doubled last December,” she said, “and in some places they’re down 25 percent.”
She said fewer homes got listed in the fall months, but homes that got listed stay on the market longer. Also, during this period, she said, more homes than usual have been taken off the market.
“We see it as a relatively fluid market where as buyer activity picks up after the holidays, there are plenty of homes that are ready to go on the market once rates go up. mortgages will have stabilized.”
Some pandemic-era owners could face buyer’s remorse
At the start of the COVID-19 pandemic, there was a rush to buy homes – and many buyers paid premiums. However, some will likely start to regret the decision, said Odest Riley Jr., CEO of Inglewood, Calif.-based WLM Realty and Co.
“The biggest problem in 2023 will be buyers who overpaid in 2021, realizing they have no equity and are stuck with a property they may not have really wanted,” he said. -he declares. “These buyers will be forced out of the bear market and back into the game when the economy recovers.”
A sense of normalcy will return
If you’ve felt out of the market for the past few years, Riley said this is the year regular, hard-working shoppers can get back in the game.
“First-time home buyers will be greeted with their FHA loans,” he said, “and sellers will get a dose of what it’s like not to be in control of the whole transaction.”
It would be a major change of pace from the frenzy of the past few years.
“From April 2020 to March 2022, sellers were able to put their properties on the market, slow down and wait for a buyer to beg them to accept an offer,” he said. “That time is long gone.”
He said the past two quarters have been filled with sellers too stubborn to accept price cuts and buyers too scared of high interest rates to make offers. However, he predicts that 2023 will be a year of corrections.
“Sellers will come back to reality and buyers will start to realize that a 5% interest rate isn’t so bad,” he said, “opening up the market for regular FHA transactions , VA and standard conventional loans”.
Rates will continue to rise
If you’re hoping the rate hikes will stop in 2023, they probably won’t, said Marco Smith, realtor at Long & Foster Real Estate in Maryland. He predicts that rates will slowly rise throughout the year.
“Depending on buyer credit, mortgage rates will remain in the mid-6% range throughout the first two quarters,” he said, “then rising to a high of 8% in June or July. “.
However, his prediction isn’t all bad news.
“When rates go up, prices go down,” he said. “Because rates are slowly rising, house prices will come down, but not significantly. This won’t help alleviate inventory issues, but should increase sales.”
Smith isn’t sure when he expects rates to drop.
“It’s hard to predict mortgage rates with certainty,” he said, “but I see rates hovering between 6% and 8% for most of the year.” By the end of the year, we could see rates come down.
Buyers will warm to higher rates
“Over the past 40 years, the average mortgage rate has been 7%,” Smith said. “People will realize that we have been spoiled by unsustainable rates and will become less nervous about buying at current interest rates.”
Still not sold? He has a different perspective to consider.
“One way to think about it is this: If you were a tenant, you were paying 100% interest rates,” he said. “Once mortgage rates start to become consistent, renters will choose to buy and sellers who were on the fence will finally put their homes on the market.”
Buyers will be more selective
For the past few years, buyers have been on demand from sellers, competing for small amounts of inventory at record prices. Steve Halpern, a real estate broker with Compass in New York, predicts this will be phased out in 2023 as quality begins to prevail.
He said buyers will have more time to look and really think about their decisions, so they will be more selective and look to homes they think are well made.
“The biggest segment of opportunity in the market will be apartments for renovation,” he said. “After COVID, buyers were afraid to renovate; so if a buyer is open they will get a much better deal.
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This article originally appeared on GOBankingRates.com: Housing market 2023: where is it, according to experts
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