The New Year is here with new resolutions, new hopes, and new real estate market trends for 2023! Suppose you have read a few articles or seen some videos on the subject. In that case, you probably already know that there are two prominent radical opinions out there: 1. It’s gonna be a real estate market apocalypse, or 2. The crash is a hoax. It’s hard to find the truth between all the scarecrows and chill champions, but one thing is for sure: 2023 is not going to be the easiest year for the real estate market.
The anxiety of uncertainty can be felt, and it’s no surprise: it would be hypocrisy to bagatelle the alarming increase of rates, which is the result of the Federal Reserve trying to get some control over the inflation caused by the pandemic, oil prices ramping up, and of course, the Russian – Ukrainian war. As in any uncertain situation, we must look out for panic generators, beware of succumbing to doomsday predictions, and continuously bust myths about the market. On the other hand, fake positivity is just as harmful, so it’s important that we check sources and keep our feet on the ground this year. Let’s see some real estate market trends for 2023!
Summary:
Real estate housing market 2023
If you’re a buyer or seller out there or want to invest, prepare to meet lots of clashing information about the real estate market trends in 2023. You may hear many people talking about a crash to come, and indeed, tendencies show that the real estate market trends are going to be very, very different in 2023. But is the real estate market going to crash? Well, it’s important to keep in mind that everything we read on the internet regarding the future is a prediction or even speculation. Meaning that there’s always a chance that it’s wrong. That’s for each of us to decide personally until we have enough data gathered to prove things. While a little understanding of the real estate market can help us to predict some basic stuff on our own, it’s always better to listen to experts too. So beware of the clickbait of the real estate market apocalypse and carefully select the information you choose to believe. Take everything, always, with a grain of salt.
That being said, here are some numbers to look at and some opinions to consider on the real estate housing market in 2023.
Winter is coming
According to some opinions, it was quite expected. After the extremely hot market of 2021, real estate market trends will lean toward cooldown, felt most at the beginning of 2023. According to the National Association of Realtors(NAR), the median home price has been increasing every month in the past year, reaching a record high of $413,000 in June and then falling to $389,500 in August. If we look at the real estate market trends in 2023, it’s obvious that we are and will be experiencing a cooldown, which is normal and was to be expected. The abnormally inflated prices in the previous years had to come to a decline at some point, and that time has arrived. This results from many things adding up, and inflation is just one of them.
At the beginning of the year, statistically speaking, things will look very, very bad. Most statistics compare the current numbers to those in the same month last year. Comparing the start of 2022 to the start of 2023 is not going to look good. Also, housing data coming out now is around two to three months old, so the current statistics are actually about the past.
But don’t let your guard down so quickly because current real estate market trends seem to show that even if we take the statistical errors out of the situation, there’s still something left.
Let’s talk interest rates
Everything starts with inflation, which got out of control, so to speak. The Federal Reserve is trying to get a grip on it by increasing interest rates. This led to mortgage interest rates to double, ending at almost 7% instead of 3%. Higher interest rates will probably decrease demand and contribute to the cooldown of the very hot real estate market of the previous years. Many prospective homebuyers won’t risk borrowing money at much more expensive rates. Real estate market trends in 2023 predict it’s more likely that more sellers will stay put and not move out to avoid getting a new, more expensive mortgage on a new home. This will slow down the real estate market. High interest rates and low demand should push the prices down, but we mustn’t forget that a tight inventory pushes prices up. And according to NAR’s recent real estate market predictions, inventory will stay tight in 2023.
This makes things sort of even out, and that’s why it’s exaggerated to talk about a crash. But the real estate market trends will not gravitate toward dropping rates soon. If inflation starts to slow down at some point, that might stabilize rates at around 7% for 2023.
This sudden increase in rates and economic instability as a whole is why panic is felt around the real estate market. Prospective buyers and sellers are pushing the brakes and pulling back from entering the market because of the seemingly crazy contrast in the mortgage rates and property values compared to the previous (inflated) ones. According to NAR, 2023 will be the year of finding equilibrium and returning to prices closer to those of the pre-pandemic times.
Housing prices
With the mortgage interest rates rising, housing is going to be less affordable for many people in the beginning, that’s one thing we know for sure. Inflation, oil prices ramping up, and the war between Russia and Ukraine taking its toll on the economy is starting to be felt by everyone. Concerning real estate market trends in 2023, a positive approach would be that if inflation starts going down, interest rates will follow.
Some real estate experts warn their audience not to panic when looking at averages. It’s important to remember that the market has differences throughout the nation. The housing market differs from city to city, region to region, and comparing the wrong data might lead to errors, misinformation, and fake news backed by unreliable statistics. Compared to 2022, everything is going to look very bad, with the peak of the contrast being expected in May. Predictions based on year-over-year data will tend to show everything in a worse light than reality.
Real estate market trends can be very different than last year’s, depending on the state we are talking about. Comparing national averages might not cover the truth for particular states. For example, looking at the map, California is one of the top states people want to move out of. Florida is leading with people wanting to move in. The top cities people are trying to leave are: San Francisco, Los Angeles, New York, Washington, and Chicago. This can be explained by the fact that the fall in home prices doesn’t even out the rise in interest rates and the extra expenses on the monthly mortgage payments. At least in some places.
Generally speaking about real estate market trends in 2023, there are, again, two prominent opinions. One of them says that the drop in property prices won’t be able to balance out the increase in interest rates. And as a result, it will be much more expensive to buy a home, resulting in people being concerned about entering the market. According to the opposing opinion, real estate market trends won’t change buyers and sellers’ behavior dramatically, and the balance will indeed settle after a while.
Inventory
From spring to mid-summer, inventory is always increasing, as people don’t tend to move or make significant changes in the cold season. Seasonality is still one of the primary forces influencing the real estate market trends. Interest rates dropping will also likely increase the inventory. Many people who want to move are stuck in their current homes until the interest rates start improving. Most people will choose to wait until it’s safer and better to buy a new house and put their current property out on the market. According to predictions on real estate market trends for 2023, inventory increase is predicted to peak around mid-summer, with more and more properties sitting on the market either because of the owners overpricing or because people can’t move into new properties because of the high-interest rates making it less affordable to relocate.
Overpricing by owners is expected to be a part of the upcoming real estate market trends, making it challenging for agents. And it’s no surprise, because it’s somewhat natural, that people will want to try to sell at the inflated prices of the previous years. Also, there will be fewer new constructions starting. On the buyer’s end, this might be a great opportunity to get a good deal on new construction properties at lower prices.
The inventory numbers will likely rise, but slowly. Currently, there are 1.28 million homes for sale in the US. The sooner homeowners decide it’s a good time for them to sell, the quicker the inventory will grow. Some estimations say that by the end of 2023, the inventory will likely grow to 1.8 – 2 million homes nationwide.
What’s happening to rental rates?
Current real estate market trends point in the direction that many homebuyers-to-be will have to delay their purchase. Current rates are probably going to exceed the budget for many first-time home buyers in 2023. Fewer families will be able to afford to buy a new home now. This will lead to a higher demand for rentals and, consequently, higher rental prices.
Fortunately, the economy is sufficiently stable to maintain a strong job market, which will probably keep incomes growing. But according to current real estate market trends, the growth in jobs won’t be able to balance out inflation, and many families will have to reconsider their moving plans and stick to solutions on a tighter budget. This is why, according to real estate market trend predictions, the more modest and smaller-sized cities will do better on the market. People will very likely look for those more affordable places when searching for a new home. As affordability becomes the major drawing force, there will be a significant growing interest in suburban homes in the upcoming year.
As the inventory will grow a few months into 2023, real estate market trends will show a deceleration in rental prices. This will occur when sellers and landlords start to get back to the “pre-pandemic normal” with their prices. High prices at the beginning of the year will likely force renters to stay put in their old homes. Slowly, as the cold season passes and prices go down a bit, inventory and rental demand will increase too.
Rental prices will keep staying high if people are forced to keep renting rather than buying. This will lead to a very high demand for rentals and keep the prices up. With mortgage rates reaching their highest rates since 2008 and home prices staying high for a while, renting will be the go-to alternative for many. For buyers postponing their plans: to avoid misconceptions about mortgage issues, stay up-to-date and well-informed in the upcoming times.
Is the real estate market going to crash?
It’s not very probable. The real estate market predictions for 2023 generally say there are enough reasons to hope that the market is slowly going to normalize after the buying euphoria peaking in the post-pandemic. People are still going to need a home for their families, so eventually, the dust cloud of the sudden halt will start to disappear. We are coming down from the inflated prices of the buying frenzy, and the transition is the hardest in the beginning. Especially, because it’s winter.
Buyer demand
Real estate market trends show really low buyer demand right now because the interest rates are up in the skies. But right after the interest rates start to drop, the demand will start to rise again.
Real estate market trends for 2023 are promising a stable, not very competitive market. If you are planning to buy or sell, take the time to get a picture of the current situation. Different times come with changes to the buying population, too. Millennials are entering the market, and bringing different tendencies to the game.
Generally speaking, real estate market predictions warn prospective buyers: if you have that financial security and well-paying secure job and are willing to deal with the future long-term higher payments, go for it. But if your situation is more fragile, you might want to wait a little bit longer.
A change of plans for everyone
Real estate market trends for 2023 are predicting, that since fewer people are going to change their homes to new ones, more people will start remodeling projects on their current properties. This could mean smaller constructions and interior transformations, and working with what’s already there, to fit a tighter budget. While this might mean a compromise, apparently there’s a good side to this too, if we look at it from a different angle. Fixing up the old a little will likely be significantly less harmful environmentally, than buying a new house, and fixing it up too.
All added up, the housing being less affordable will be the hardest for first-time home buyers, who might have to put their plans aside for a while, and choose rentals instead. Real estate market trends in 2023 will not favor those on a tight budget planning to move this year. But reconsidering location or choosing a more suburban area might help young homebuyers to make their first purchase in spite of the bad conditions.
2023 real estate market trends will make things hard for professionals working in the field too. Realtors, agents, brokers, investors, and everyone who is earning money in the field of real estate will probably have some challenges, at least at the beginning of the year. It’s a common misconception, that realtors don’t have to work hard, and this year might be more challenging to many of them too.
In conclusion,
Inflation, the home prices dropping, and the interest rates rising have led to some panic, and it’s not that surprising after all. All these indicate changes in the real estate market trends for the upcoming years, and many people are concerned about the situation for valid reasons. Homes will seem much less affordable at the start of the year, and fewer people will be willing to sell in the beginning, leading to a shortage in inventory. For buyers with a less stable income and not-so-good credit, it might not be the most favorable time to get a mortgage at the present rates. Hopefully, as the Fed starts curbing inflation, things will slowly start to look better. For buyers with good perspectives and bigger down payments, this could be a good time to buy a property. For sellers, this will not be the best time to sell. But also, remember, that prices will be going back closer to the ones in the pre-pandemic years, and selling at the prices of the post-pandemic frenzy will probably be impossible from now on.
To add everything up, 2023 is coming with major changes, and it will be shaky in the beginning. So hang in there, and don’t panic. Experts say this year will bring balance, and put more realistic grounds under our feet.
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