The real estate market in 2022 was unquestionably chaotic. But what about the 2023 housing market? Real estate professionals, buyers, and sellers are all wondering what to expect after finishing such a turbulent year. There’s a buzz that this year may bring a shift from a buyer’s market to a seller’s market. Is there any truth to the speculation? Let’s take a brief look into the housing market right now to see if any evidence supports this.
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Will Home Prices Decrease?
According to the U.S. News Housing Market Index, prices are expected to decline by 10% or more for local markets across the nation. Additionally, depending on the U.S. government’s ability to curb inflation, markets with high home prices could see a drop of up to 20-25% if the nation experiences a recession. Depending on who you ask, these numbers could seem insignificant; however, it’s worth noting that these numbers are far more in line with what could have been expected pre-pandemic.
Where are Mortgage Rates Headed?
As of Wednesday, January 11, 2023, current rates in Indiana were 6.50%. The Realtor.com® 2023 Forecast projects that the mortgage rate will continue to rise from last year but will decelerate to more stability. Anticipate a rate of roughly 7.4% for most of the year as economic growth slows and inflation declines. Then, at the end of 2023, we should see a slight step down to 7.1%.
What’s the State of the Housing Inventory?
Even though mortgage rates are slowing their trajectory, they are still rising. Some experts believe this will impact the housing inventory for 2023. Dennis Shirshikov, a strategist at Awning and a professor of economics and finance at City University of New York, told Bankrate, “Housing inventory will rise throughout 2023 as homes become more unaffordable due to high rates.” So, even though inventory will still not have recovered to pre-pandemic levels, the inventory is estimated to rise by 22.8%.
The End Result
While it is true that home prices are projected to be lower and inventory to be greater, the factor of increasing mortgage rates still exists. So, are we shifting from a seller’s market to a buyer’s market in 2023? Yes and no. Yes, we have begun taking steps to make homes more available and affordable to buyers. Additionally, buyers won’t have to experience the extreme competition that has been pervasive over the past few years as houses stay on the market longer.
However, the full transition of who owns the market will not take effect this year. Even though mortgage rates are leveling off, homes will not seem attainable until the numbers start to actively go down. Furthermore, we’ve established that part of the increase in inventory correlates with these high mortgage rates. This begs the question whether there will be enough supply to meet the demand once rates finally drop. Thus, until both the rate of mortgage and inventory improves, we are still firmly in a buyer’s market.
Be Prepared for the 2023 Housing Market
Whether you’re a real estate professional trying to help your clients, a seller trying to stand out from the tight competition for this year, or a buyer saving for their dream home, Metropolitan Title wants to help you navigate the 2023 housing market. We’re an experienced team of industry related professionals across Indiana ready to help you achieve your real estate goals. Contact us today and see the difference Metropolitan Title can make for you.