The big talk in 2022 was interest rates. The steady increase in interest rates brought a little volatility to the housing market. However, from December 2022 to February 2023, interest rates steadied and, in some cases, even started to decline a bit. So if you are curious about what the 2023 real estate market looks like and whether it’s time to get in, out, or both, here are a few things to consider.
Inflation Is Still A Factor
The US Inflation rate was as high as 7% in 2021, and it finished at around 6.5% at the end of 2022. Updates on the next inflation rate and how it’s changed in the last few months will be coming out soon. Some say that it is starting to decrease a bit.
Inflation still becomes a factor in the housing market, especially when you combine higher interest rates with inflated home prices. When you throw in fears about the recession, it will undoubtedly keep some buyers away.
Home Prices Declining Slowly
We find it interesting when buyers say they are waiting for prices to drop before they purchase. Chances are you will be waiting a while. We expected a market correction in late 2022 and 2023, but the so-called “crash” is not something we are seeing.
In fact, in some areas of the country, like Atlanta, housing prices are still on the rise. The market correction is happening, but inventory is declining, holding prices relatively steady, with slight declines in some pockets.
The National Association of Realtors shows the median sales price in December 2022 was $366,000; this is still up about 2% from the previous year.
Housing Inventory Remains Low
The early parts of 2023 have shown us that housing inventory still remains a concern. The housing supply is low, and it is making it difficult for some buyers to find exactly what they would like. In addition, the low inventory has increased demand overall.
The NAR has stated that pending home sales increased by 2.5% in December. This is the first time we have seen an increase here since May. Most of these contract signings are in the South and West, but it’s nice to see that deals are making it to the table at this point.
There are no major indicators of inventory increasing in 2023. As we stated, if you are waiting for prices to drop, you may be waiting a while, and if you are waiting for the right house to come along, that could also take some time.
Is The Crash Coming?
The crash that some were worried about seems to be staying away. We certainly see some leveling out and slight drops, up to 5% in some areas. However, there were two years of very strong growth, so the attrition we’re seeing now is slight comparatively.
We are seeing the slowdown, but homes can sell quickly because of low inventory, assuming it’s priced right. In addition, with mortgage rates steadying, there are more qualified buyers to grab the available inventory.
The bottom line, 2023 should be a year of recovery and stabilization, not a crash.
Positive Equity In Homes
One of the main positives of the large increase in home prices over the last few years is that homeowners now have more home equity. There are fewer foreclosures on the market, and people have a bit more stability.
Having equity in a home helps stay afloat financially and makes it easier for sellers to purchase their next property and potentially upgrade. This should pay off for years to come.
Should I Buy In 2023?
It’s always best to decide to buy a house when you are financially ready and find a house you love. Trying to make your decision to purchase a home based solely on trends and statistics can be dangerous.
Choose a home you love, make sure you can afford it, and decide based on these things. If you are forcing yourself into a purchase simply because of market conditions, the results are likely not going to be what you want them to be.
Sellers Still Have The Upper Hand
With low inventory, sellers almost always have the upper hand. Of course, when mortgage rates when up last year, sellers had difficulty finding qualified buyers. However, now that rates are starting to settle and are even coming down, the market should see that affordability index head back up.
At the end of 2022, the affordability index dropped to 95.5, according to the National Association of Realtors. This is down considerably from two years ago. To see buyers have a bit more purchasing power, the affordability index will still need to increase.
In the end, if you have a house available for sale, chances are you are one of few in your neighborhood. Do the best you can to make it appealing for a new buyer, and you can still see a quick sale.
The concept of the 2023 crash probably needs to go away at this point. The real estate market is holding steady, with the most significant issue being the lack of available inventory. If inventory starts to increase and mortgage rates steady or even decrease a bit, the chance of 2023 being a strong year is a good one. As we always recommend, consider your real estate transactions based on your personal needs and wants first and look at stats and trends second.