Three Things to Expect If You’re Buying a House in 2023

If you were househunting during the past two years (2021, 2022), you likely hit a few roadblocks. High home prices and limited options created a sellers’ market that made it challenging for many to become homeowners. But if you decided to wait until 2023, you might have a better shot.

Housing market predictions for 2023 point to a drop in prices and a shift to a buyers’ market. But, interest rates might continue to rise, and demand could remain low.

Of course, the housing market looks different depending on where you live. What’s happening in one location could be completely different in another state or even in a nearby neighborhood. Therefore, take these expectations for buying a house in 2023 as a general overview, and check with your real estate agent to get the specifics on your local market.

1. You Will Likely See A Drop In Home Prices

Thanks to rising interest rates during 2022, overall home prices have experienced a significant decline. In 2023, predictions are anywhere from 1.5% to a whopping 5% to 10% drop, according to Goldman Sachs. But a persistent low housing supply pushes many experts to lean more toward the lower end of that spectrum. (But again, a lot depends on location.)

Lower home prices certainly make buying a house more viable for many homebuyers. However, experts recommend not waiting too long. On the flip side, you have interest rates that are expected to eventually continue to rise.

2. Possible Increase in Mortgage Rates

Interest rates could stay the same or see a slight rise. According to Freddie Mac, the average rate for a 30-year fixed loan as of October 2022 was 7.08%. However, some experts suggest that mortgage rates will decline slightly to between 6.7 and 6.2% throughout 2023.

But the interest rate situation is a wildcard in 2023. With the country experiencing inflation it hasn’t seen in decades and current market conditions, it’s hard to predict where rates will go. Many analysts also predict much higher rates. So if you know that 2023 is your year to buy a home, consider talking to a pro in your location and locking in a lower rate.

3. Supply Stay Low, But Demand Might Start to Falter

One of the reasons for such drastic home price increases in 2021-2022 was the low supply of homes available on the market. It’s a classic case of supply vs. demand. In 2023, the expectation is for supply to remain low because of the rising interest rates.

Many homeowners are sitting in homes with loans that have less than a 5% interest rate. Therefore, unless they have some unique situation where they must sell, there’s not a lot of incentive for them to do so right now. Sellers are better off saving money with their lower interest rate and waiting till the market shifts more in their favor.

On the buyer’s end, higher interest rates could decrease demand, which means less competition for buyers. Therefore, in many cases, buyers will have the upper hand. If you plan to buy, work with a professional real estate agent to negotiate for you and get the best deal.

Buying a Home in 2023? Work with a Professional

Remember, these are general expectations for the overall housing market in 2023, so where you live could experience something different. This is why it’s so important to work with a professional, knowledgeable real estate agent who knows your local market inside and out.

Home prices could be holding steady in your area, or perhaps they’ve seen a drastic dip. Likewise, there could be more or fewer homes for sale in your neighborhood. Local agents will know exactly what’s happening in your specific location and can offer personalized advice and guidance.

Look at the Big Picture When Buying a House

If you decide to buy in 2023, consider various scenarios and don’t simply buy because home prices are low. There are other factors to consider when purchasing a house.

A general rule of thumb is your house payment should only be 30% of your gross payment. (This payment includes taxes and insurance.) Some people can afford a bit higher if their other expenses are low. However, if your other expenses are high, you might be more comfortable going below 30%.

You can also do several things to maximize your savings. Review your credit report and ensure your credit score is in good shape. If it isn’t, put off househunting until you can boost your credit score. Shop around for mortgage rates and, if you can swing it, choose a shorter loan term.

But buying too many houses could lead to tight, stressful situations in the future. So look at your big picture, consult your agent, and decide the best move for you in 2023.

Originally posted on https://www.cbhre.com/blog/1237/three-things-to-expect-if-you%E2%80%99re-buying-a-house-in-2023