What Can Realtors Expect from the 2023 Home Market?
What Can Realtors Expect From the 2023 Home Market
Will the housing market remain in its messy condition in 2023? Or will the 2023 home market finally return to a pre-pandemic normal? If you’ve asked yourself these questions, you’re in the right place.
We’ve done our homework to both analyze current marketing trends and what the experts have to say. There is a lot of potential in the 2023 home market, and we’ll be covering exactly what you can expect to change (and not change).
- Home Price Growth Will Go Back to Normal
Year-over-year home price growth has been unsustainable for months. Will this scenario change in 2023? To every homeowner's relief, it is likely that home price growth will decrease. According to Bank of America, the company predicts that U.S. home prices will rise just 5% in 2023.
To put things into perspective, Zillow predicts that the year-over-year home price growth will hit an astounding 22% in May 2022. This rate will then decrease steadily, and throughout next year until returning to pre-pandemic levels by December 2023.
- Mortgage Rates Will Increase
Piping hot wage inflation and tight labor markets — that’s not a good combo. Mortgage rates are virtually guaranteed to rise in 2023 because of these conditions. Last month, the Federal Reserve announced that they would raise interest rates 11 times (at a quarter of a percentage point each) through 2023.
Realistically, the economy will already slow by the time 11 interest hikes come around. Still, at least half of these planned interest hikes will actually happen. The Mortgage Bankers Association predicts that interest rates on average for 30–year fixed rate mortgages will hit 4.5% by the end of 2022. Throughout 2023, this rate could climb to 6% or even higher.
- A Broken Global Supply Chain Will Persist
The housing market has experienced the indirect effects of a failing global supply chain. Houses aren’t being built on par with demand simply because homebuilders aren’t able to source the raw material on time. With the current supply chain problems, the global supply chain is unlikely to improve until the end of 2023 or later. (Read: Navigating Low Home Inventory)
- Less Housing Competition
Luckily, there seems to be less housing demand — but, not enough to overturn the seller’s market. For the 2023 home market, houses should stay on listings longer. Lawrence Yun, chief executive at the National Association of Realtors (NAR), expects less competition in the housing market in 2022 and onward.
Of course, this isn’t a surprise to most realtors. Wages simply aren’t matching the high home prices that are here to stay. In 2023, the median house is estimated to be $395,000 as projected by Fannie Mae. The combination of rising interest rates and rising house prices will push many would-be buyers out of the market.
- More Expensive Houses Staying on Listings
Again, affordability will become a pressing factor in 2023. According to Yun, homes priced at $500,000 and below are disappearing fast, while supply at higher prices has risen. Homebuyers who are able to purchase are doing so in fear that interest rates and home prices will climb even higher.
Houses that were already expensive to begin with have simply become too unaffordable for the general population — hence why there’s less competition for them. “There are more listings at the upper end, homes priced above $500,000, compared to a year ago, which should lead to less hurried decisions by some buyers,” says Yun.
- Foreclosures Will Rise
While we can’t say for certain whether a housing crash will happen, foreclosures will rise in 2023. Millions of people took advantage of mortgage forbearance during the COVID-19 lockdown. Those who are still in forbearance in 2022 are more likely to be economically unstable.
With mortgage forbearance programs coming to an end, these people will struggle to repay the amount owed. Even the loans that do offer forbearance extensions will expire by mid-2023. As such, foreclosures will tick upwards through 2023. This is especially the case if an economic crash happens and puts millions of people out of work.
So what’s next?
While we can’t see the future, we can do our best to take an educated guess. This is especially the case for realtors. To best help your clients, it’s important that you know what to expect and how to navigate uncertain waters. At LendPro Mortgage we are dedicated to helping you and your clients in this market. Contact us today!