If the last two years have proved anything, it is that making predictions are unpredictable. Over the last two years, the housing market has been on a wild ride, but it seems that the sharp rise in both housing demand and mortgage rates may be finally leveling off.
We saw the first decline of housing prices in June of 2022, marking the first time since 2012 that prices fell. While the decrease was notable, house prices only dropped by 2.4% between the months of June and October 2022, which is likely why the National Association of Realtors expects home prices to be static as part of their real estate market 2023 predictions.
Many real estate analysts are making real estate market 2023 predictions that point to the market cooling off, but in reality, it is stabilizing more than it is cooling off. After several years of rapid growth in housing prices fueled by falling mortgage rates, things are finally starting to level off. Therefore, the market isn't cooling off; it is simply finding its new base.
Housing prices won't fall too much given the national housing shortage that is expected to last for at least a decade and involve a two to six million shortage of newly built homes, depending on who you ask. This is good news for both home buyers and sellers who are looking to get the best deal on their real estate.
Despite some sources stating the real estate housing market in 2023 will drop, the more realistic middle ground is that house prices will sit where they are and remain there for the rest of the year. That means sellers can still expect to list their homes at higher prices than they likely purchased them just a few short years ago. At the same time, buyers can hope for the same appreciation of their home values due to this continued demand.
So how are things going to level off? It's a reasonable question, especially if you read through a few bullish and a few bearish real estate future predictions. More likely, what is actually happening is that the real estate market is getting a reset - something that hasn't actually happened since WWII. For two years, people wondered just how high the real estate prices would go before they stopped, an answer that is closely tied to mortgage rates.
The pandemic very briefly stalled the real estate market, but as people moved into the suburbs in droves and mortgage rates dropped rapidly, it quickly flip-flopped. Thousands of people wanted to take advantage of the prime mortgage rates, and finding properties in suburban cities became nearly impossible.
This trend is not sustainable, something Federal Chair Jerome Powell noted when he told reporters it was time for a "reset," which was done by increasing the mortgage rate.
When you look at predictions of how the real estate market will be in 2023, most predictions involve the mortgage rate dropping again. The mortgage rate spike was likely designed to halt the further growth of house prices; it wasn't meant to stall the market.
The prediction for the housing market 2023 is complicated, and it can vary based on which source you glean information from. Some, like the NAR, expect to see house prices stay the same and mortgage rates drop back down to 5.7%, while others, like Realtor.com, expect house prices to rise by 5.4% and mortgage rates to settle at 7.1%. However, regardless of your chosen source, the news is good for both sellers and buyers.
Any seller that purchased their home more than five years ago is likely to be able to sell their home at an increased price during 2023, while any buyer who buys now can hope that demand will bring with it rising home values for them as well. And any drop in interest rates can present an opportunity for refinancing when the time comes. As they say, "marry the house, date the interest rate."
That's a win-win situation for everyone and creates a positive real estate outlook for anyone hoping to glean some hope from the 2023 predictions for the real estate market.
As uncertain as the real estate market can be, Eastwood Homes is here to guide you through the entire home buying process. We work to make the home building process as easy as possible for you. Furthermore, we want to offer you the best options when it comes to financing your new home, so be sure to check out our mortgage calculator and financing options! Learn more about our home building process or contact us.
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