Home buyers, gird your loins: 2023 is on track to be a bumpy ride for anyone looking to own in the new year. But it’s not all bad news. There are signs that mortgage rates will fall by summer, sellers will be more open to negotiating and you’ll have more housing options to choose from. Here, are 5 trends home buyers can expect as we segue into 2023.
- Finally! There Will Be More Inventory
This is a major pro for buyers: According to Realtor.com‘s Chief Economist Danielle Hale, the number of homes for sale is expected to rise by nearly 23 percent in 2023. But there’s a downside: The reason for the increase is higher homebuying costs, which are reducing demand. “It is possible that some areas of the country—and possibly even nationwide—will see months of decline, but for 2023 as a whole, we expect housing prices to remain high and increase by more than 5 percent over 2022,” she says.
- Housing Prices Are Up, But Sellers Are Making More Concessions
It’s true that homebuyers are set to face significant affordability hurdles in 2023 and need to be prepared to navigate a tough market, but the rate of home price growth is a significant slowdown from 2022’s double-digit pace, Hale explains. (In fact, it clocks in well below what was typical in 2013 to 2019 pre-pandemic period.) Better yet, sellers are mindful of the shifting real estate market, and data shows they’re making adjustments. “Our latest monthly research shows that one in five sellers has reduced their asking price,” Hale says. In addition, sellers are more likely to have handled major repairs before listing their homes. Bottom line: Sellers are primed to negotiate, which is good news for buyers.
- There Is Still a Shortage of Starter Homes
As we reported earlier this year, starter homes continue to be in high demand and there are fewer homes available at this price point. This means that entry-level buyers are likely to continue to see exceptionally competitive conditions, Hale explains.
- Rent Is Still Going Up, Up, Up
A tough housing market for home buyers means that families will need to rent for longer. This is expected to push rents even higher (as much as 6 percent in 2023) with one caveat: In the new year, we can also expect to see an increase in for-rent options as big, multi-family construction projects get finished, says Hale. (Lack of inventory for rentals continues to be a major reason for the increase in rents.)
- Mortgage Rates Should Top Out by Summer
Per Hale, mortgage rates (which are currently hovering at 6 to 7 percent for a 30-year fixed) will continue to climb through the first half of 2023—but we may see a decline for the second half of the year. “The outlook for mortgage rates is highly dependent on what happens with inflation,” says Hale. “The sooner we see inflation easing up—something that is starting to trend based on the last few months of dating—the sooner we’ll see an end to the Fed tightening cycle that is pushing short-term interest rates higher.”