If the societal and economic impacts of the global COVID-19 pandemic proved anything, it’s that no one can predict the future. From hospitality to tourism to housing, the novel Coronavirus disrupted nearly every facet of our lives.
But now, nearly three years down the line, society is seeing a gradual return to normalcy. Travel is up, active cases are down, and even the housing market seems to be stabilizing.
So, what does this mean for hopeful homebuyers in 2023?
In short, the housing market is practically guaranteed to look vastly different than it has these past few years. While you may not necessarily be surprised by this news, knowing what’s to come can help you stay ahead of the curve and make more informed housing decisions.
To help, we’ve compiled insights and advice from industry experts across the nation for a comprehensive 2023 housing market projection.
The 2022 Housing Market
To understand the future of housing, we first need to look to the past.
Over the last year, home buyers saw interest rates slowly increase. Meanwhile, home prices remained high, in part due to severely limited inventory and sellers seeking profits similar to those in years prior. Still, the market remained undeniably geared toward sellers, with buyers practically clamoring over each other to secure a purchase – keeping the housing market strong.
As for 2023? Luckily, experts predict a gradual return to relative normalcy. Here’s why…
2023 Housing Market Projection
Of course, we can’t say with certainty what 2023 will bring. If we could, everyone at Motto would be enjoying the spoils of lottery wins instead of working to provide you with useful mortgage and homeownership insights. That said, understanding historical data, analyzing trends and turning to the experts can all help clarify what may be to come.
The top three characteristics borrowers are likely to observe in the 2023 housing market include:
Home Prices Stabilizing
While home prices have increased dramatically in recent years, climbing interest rates have begun to slow the price hike tide.
While nationwide prices may not drop significantly, many experts do predict dips in certain local markets as well as a gradual plateauing effect overall. If nothing else, momentum will pale in comparison to 2022’s figures.
For example, Danielle Hale, Realtor.com chief economist, predicts that, “For-sale homes will remain high-priced, with the national annual median price for 2023 expected to advance another 5.4%—less than half the pace observed in 2022.” It’s worth mentioning that the 5.4% appreciation prediction is MUCH closer to the historic average of 4.59% (over the last 30 years).
Jacob Channel, senior economist for LendingTree, agrees, stating that, “mortgage rates might stabilize, prices could decline, and buyers may be able to negotiate with sellers more in 2023 than they were able to over the height of the pandemic…”
In other words, first-time buyers will again have a fighting change.
Interest Rates Stabilizing
As many current and potential buyers know, and as headlines are often quick to reflect, the days of record-low mortgage interest rates are firmly in the past. Much of 2022 saw interest rates climbing higher, but 2023 will likely see them plateau, at least slightly.
“After big run ups in housing costs in 2020 and 2021 followed by 4% increase in interest rates to slow the market in 2022, 2023 is set up to be a more normal year as interest rates stabilize and more newly constructed housing units are added,” explains Jamison Manwaring, CEO and co-founder of Neighborhood Ventures.
While it’s true that interest rates are significantly higher than their pandemic-era counterparts, it’s important to remember that those figures were largely an anomaly. The average 30-year mortgage rate since 1971 is 7.76%, which is still slightly higher than today’s.
You should also keep in mind that mortgage rates are constantly fluctuating. This is due to a combination of market conditions, including the Federal Reserve, inflation and economic conditions.
Refinancing is a common avenue many owners choose to pursue when more favorable rates are within reach. In other words, your current home interest rate doesn’t necessarily need to be your forever home interest rate. As Motto Mortgage President and CEO Ward Morrison would say, “date the rate, marry the house.”
Supply Increasing
Despite gradual stabilization, relatively high prices and interest rates will only put a damper on the buying process for some. In many markets across the country, however, more homes are expected to sell. This is due, in large part, to an increase in inventory.
“While supply and demand of home inventory is still off balance, we are beginning to see inventory rise which is putting buyers in a more favorable position than they were in the 2022 seller’s market,” said Morrison. “In 2023, I anticipate we will see a shift to more of a buyer’s market where sellers will be more apt to work with a buyer to see the purchase through to the finish line.”
Wong agrees, stating that, “As interest rates move down, we’ll see affordability improve, demand pick up and healthier levels of inventory return.”
Of course, some areas of the country will see more growth than others. The real estate markets poised for the greatest growth in 2023 are projected to include:
● Hartford, Connecticut
● El Paso, Texas
● Louisville, Kentucky
● Worcester, Massachusetts
● Buffalo, New York
● Augusta, Georgia
● Grand Rapids, Michigan
● Columbia, South Carolina
● Chattanooga, Tennessee
● Toledo, Ohio
If you live in one of these markets you may need extra preparation, but all 2023 buyers should still be prepared for some (continued) healthy competition despite increasing inventory.
2023 Housing Market Projection: How Motto Mortgage Can Help
After all the chaos of a pandemic-era housing market, the coming years could be just what the industry needs. Between widely-predicted slowing price hikes, stabilizing interest rates and an increasing amount of housing supply, experts agree that a gradual return to normalcy may very well be in the cards.
Keep in mind that local markets do experience their own unique fluctuations, which is why finding local expertise is so important. Build your 2023 homebuying team with purpose to enjoy professional advice, learn more about the market and move into your dream home, all before 2024.
Published on January 9, 2023
