As 2023 begins, it’s a good idea to take stock of the trends that are emerging in the real estate market. While no one can predict for certain what will happen in the next year, here are three of the biggest real estate trends that should continue to shape the market. Keep reading to get a better sense of what to expect and how these trends will impact you as a buyer or seller.
Interest rates will remain high
Freddie Mac, one of the largest buyers of mortgages in the United States recently put out a quarterly forecast projecting that interest rates will continue to hover around 6.4% in 2023. Specifically, the housing giant predicts that rates will ultimately drop, if only slightly, from 6.8% in Q4 2022 to 6.2% in Q4 2023.
As for what this means for buyers, 2023 should be about adjusting their expectations for their buying power. Since mortgage rates likely won’t be heading back to their pandemic lows, it will be more important than ever to understand what you can afford to buy before shopping for available homes.
Sellers, on the other hand, should expect to see offers closer to their list price. With so much of buyers’ money going to interest payments, most will no longer be able to make those sky-high, well-over-asking-price offers that were common in 2021 and 2022
Home prices will vary
Historically, home prices have almost always risen. However, 2023 might be one year where we could see an exception to that rule in some cases.
In the National Association of Realtors (NAR)’s 2023 Real Estate Forecast, their chief economist predicts that home prices will remain relatively stable nationally. However, local market fluctuations will vary. NAR’s economist feels that the nation’s most expensive markets, like San Fransisco’s Bay Area, will likely see the largest drops in price due to rising interest rates.
For sellers, this forecast likely means that they will need to think more carefully about their list price. Ideally, you should talk to your real estate agent to get a sense of how prices are trending in your area and ask for a conduct a comparative market analysis to determine your home’s current fair market value before marketing it for sale.
Buyers, on the other hand, may start to feel a little relief from the added burden of inflated interest rates. It can also benefit you to determine the home’s fair market value before submitting an offer. That way, you’ll have a sense of how prices are trending and if you have any wiggle room when submitting an offer.
Inventory levels and time on market will increase
For its part, Realtor.com forecasts that inventory levels will continue to rise this year. According to the data, these levels saw a modest 4.0% rise in 2022, but they expect that figure to jump to 22.8% in 2023. As inventory levels rise, the website also expects time on market, or the length of time the home is listed for sale before an offer is accepted, to lengthen.
This news is particularly good for buyers. Traditionally, as time on market becomes longer, sellers tend to become more open to negotiation. In some cases, this may provide the opportunity to submit offers that are lower than the list price or to ask for additional seller concessions.
By the same token, sellers may need to become more flexible. Rather than holding out for the perfect offer, they should take the time to consider all the offers that they receive. When there isn’t much interest in the property, it’s a sign that a price adjustment may be in order
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