Slow Market in the Beginning of 2023
As buyers contend with high interest rates and relatively low inventory, the market slowdown that began in early February of 2022 will continue into this year, yet begin to pick back up again around spring time. According to the NAR, the decrease in sales will range from 7% year-over-year,to as much as 16%, according to real estate brokerage Redfin.
Mortgage Rates Will Decrease
Mortgage rates are expected to continue their downward trend in 2023, potentially falling below 6% by the end of the year and stabilizing at that level. The Federal Reserve's potential lightening of short-term rate hikes and falling rent prices are contributing factors that may lead to more favorable mortgage rates for home buyers. While it is unlikely that rates will return to the ultra-low levels seen in recent years, the expected decrease in mortgage rates is welcome news for home buyers.
Home Prices Will Balance
There is a range of views on the direction of home prices in the near future, with some experts predicting a decline in the rate of price increases. It is generally agreed that the high rate of price increases seen in recent times is unlikely to continue. Some predict modest declines in home prices, while others anticipate steadier or even slightly rising prices in the beginning of the year due to low inventory that will then balance out in the spring.
Limited Inventory Expected
The supply of homes on the market is expected to increase by 23% in 2023 due to slower sales, though it will still be below normal levels. The average time a home spends on the market is expected to double from 11 days in 2022 to 22 days in 2023, allowing the housing supply to build up. The number of homes on the market will remain below pre-pandemic levels, though more buyers may return to the market as borrowing conditions improve and mortgage rates potentially decrease.
In 2023, real estate markets in the US are expected to show more diversity in terms of demand. While some cities that attracted many remote workers during the pandemic, referred to as "Zoom towns," may see significant declines in home prices, other markets, particularly in the South and Midwest, are anticipated to remain popular and may experience increases in home prices.