As the year 2022 ends, many people are looking ahead to 2023 and considering the prospect of buying a house. But with the real estate market constantly fluctuating, it can be tough to know what to expect in the coming year. Will mortgage rates continue to rise? Will home prices go up or down? How will the level of competition among buyers impact the process?
To help potential homebuyers navigate the market in 2023, we’re discussing what top industry experts shared when asked for their housing market projections. In this article, we’ll share these insights and discuss how to approach the process of buying a house in the coming year. So, if you’re considering making a move in 2023, read on for all the information you need to make an informed decision.
Will Mortgage Rates Continue to Rise?
The National Association of Realtors’ Senior Economist and Director of Real Estate Research envisions three different scenarios for mortgage rates in 2023. The first scenario involves a continuation of high inflation, leading to repeated interest rate increases and mortgage rates potentially reaching 8.5%.
In the second scenario, a gradual deceleration of inflation in response to interest rate hikes leads to mortgage rates stabilizing at around 7-7.5%. The third scenario involves repeated interest rate increases to curb inflation, leading to a recession and a potential drop in mortgage rates to 5%.
Home Sale Projections
The three scenarios discussed above could also significantly affect home sales in 2023. According to the same expert, under the first scenario, home sales may drop by more than 10%, while the second scenario could lead to a 7-8% decrease in sales. Whereas, in the third scenario, home sales may decline by over 15%.
Our other experts also predict that the slowdown in home sales seen in 2022 will continue into 2023, with existing home sales expected to hover around 4.5 million and new-home sales around 600,000.
Additionally, listings may take longer to sell, with days on the market potentially reaching 30 or more as the market cools down. The average days on the market may also increase by two to three times current levels.
The Impact on Home Values
One expert predicts that, due to low inventory, home prices will not drop in 2023 and may increase by just one percentage point. However, another expert believes that higher interest rates will negatively impact home values and pricing, resulting in a soft real estate market with lower home prices. Despite this, some potential buyers may still enter the market, particularly those who are not as affected by interest rate concerns, such as those paying with cash or those with lower loan-to-value ratios.
On a national level, home values are expected to decline modestly, possibly by 5-10%, with larger declines potentially seen in more expensive markets. However, limited inventory, strong credit quality among current mortgage holders, and demand from young adults looking to become homeowners may help prevent prices from falling further.
Home Inventory Levels
There is disagreement among experts about housing inventory projections for 2023. One expert believes that current homeowners are unlikely to trade in their low mortgage rates for higher rates on a new home unless they must, leading to a continued low supply of existing homes. Additionally, a decrease in housing starts over the past three months may not lead to a significant increase in new construction.
However, another expert predicts that housing inventory will rise throughout 2023 as high mortgage rates make homes less affordable, leading to an increase in supply.
Housing Market Projections Closing Thoughts
Overall, experts predict that the real estate market in 2023 will be uncertain, with tepid demand and a limited supply of available homes. Mortgage rates may pull back if inflation pressures ease, but if they do not move much, there may be a decrease in purchase loans, and a continuing decline in rate-based refinance activity.
As a result, more homeowners may stay in place and pursue home equity loans or lines of credit for home improvement projects rather than moving. It is hoped that as the housing market normalizes, interest rates will start to decrease. Until then, those who cannot afford current borrowing costs may have to wait, and those holding out hope for lower rates may have to accept that the lower-rate financing opportunities of recent years have closed.
ABOUT EASTLAND ESCROWS IN COVINA, CALIFORNIA
If you’re a real estate agent or broker representing buyers and sellers. Or, if you are considering buying or selling a home, please consider calling Eastland Escrows, Inc. to manage the escrow account. We are an independent escrow company based in Covina, CA serving Southern California since 1973. With more than 100 years of combined experience, we pride ourselves in working like a dog on behalf of all our clients! We have closed thousands of escrow transactions from real estate sales and refinances to business sales and mobile homes.