5 Predictions for 2023

1. The is no housing bubble 

Over the last few years home prices increased dramatically due to high demand as an outcome of the pandemic and historically low interest rates. While we expect to see some year over year price declines we don’t expect a large drop in home values in our area. 

2. We won’t see a flood of homes

While we have thankfully seen an increase in the number of homes for sale from pandemic levels. We are and will continue to see an increase in new construction homes due to supply chain issues leveling off but still a lack of existing homes for sale. Buyers are still struggling to find their next home with limited choices in homes on the market. A lack of existing homes coming on the market is because of the number of homeowners who purchased or refinanced over the last few years. It is estimated that 25-30 Millions homeowners currently have a loan with an interest rate of around 3% or lower. What would lead them to sell? The normal reasons - Downsizing, moving up, relocating for a job, divorce, and unfortunately death but the market won’t see the normal turnover we are used to. This will be a factor when people are deciding to move or not. 

3. Mortgage rates will drop

Mortgage rates started to skyrocket at the start of 2022 as the Federal Reserve announced its intent to address inflation. While the Fed doesn’t control mortgage rates, it can influence them, which we saw with the 30-year rate rising from 3.2 percent in early 2022 to over 7 percent by October. Its efforts so far have yet to reduce inflation, but they have increased the likelihood of a recession in 2023. It is expected that rates will stabilize in early 2023. Rates are expected to remain above 6 percent until the fall of 2023 when they should dip into the high 5 percent range. While this is higher than we have become used to, it’s still more than 2 percent lower than the historic average.

4. Expect the Market to Balance

With supply levels expected to remain well below normal, it’s unlikely that we will see a buyer’s market in 2023. A buyer’s market is usually defined as having more than six months of available inventory, and the last time we reached that level was when we were recovering from the housing bubble. 

5. Buyers will continue to struggle with affordability

In most markets, home prices will not increase much in 2023, but any price drop will not be sufficient enough to make housing more affordable. And with mortgage rates remaining higher than they’ve been in over a decade, affordability will continue to be a problem in the coming year.