2023 State of the Real Estate Market
What’s in Store for Real Estate in 2023?
We’ve compiled data and predictions for the 2023 real estate market to help you make an informed decision about when the best time to buy or sell might be for you and your family. More questions? Contact us and we’re happy to talk specifics!
Real Estate Market Update
From buyers to sellers, to agents to lenders, the real estate market has had its shares of ups and downs this past year. With large shifts in mortgage rates and inflation over the last 12 months, the market has continued to change in response. Despite tight inventory, buyers have started to see less competition for homes over the last six months. However, for sellers who price their home right, they’ll continue to be competitive. Many real estate experts are expecting this to be a typical spring market, with a rise in home sales in the spring as we used to expect yearly prior to 2020.
First Quarter 2023 Predictions
Home prices anticipated to rise year-over-year 5.4%.
Inventory will rise 23% year-over-year.
66% of Americans are anticipated to own a home in 2023.
Home Sales
Home sales have risen steadily since the Great Recession of 2008, as you can see in the chart below. There were an estimated 5.8 million homes sales in 2022. Low inventory of houses for sale continues to be a common problem, especially in many of the highly sought-after neighborhoods in Arlington and Northern Virginia.
Existing Home Sales
Existing Home Inventory $1.22 million (-.8% year over year)
New Home Starts/Completions 1.3 million/1.4 million Year-Over-Year
Projected number of single-family home new builds for 2023: Over 1.2 million
Volatile lumber prices have added $14,345 to the average price of a new single-family home
“The demand for housing continues to outpace supply. The economic conditions in place in the top 10 U.S. markets, all of which are located in the South, provide the support for home prices to climb by at least 5% in 2023.”
The National Association of Realtors (NAR) is predicting 4.78 million existing home-sales in 2023, down 6.8% from 2022. Lawrence Yun, Chief Economist for NAR, says “The demand for housing continues to outpace supply. The economic conditions in place in the top 10 U.S. markets, all of which are located in the South, provide the support for home prices to climb by at least 5% in 2023.” While prices may increase in those top markets, prices will likely remain steady in much of the country with Yun predicts that some markets will see small prices gains and others will see small price declines. It will largely depend on the area. Volatile lumber prices have added $14,345 to the average price of a newly built single-family home, not helping the ongoing low inventory. Many experts are making predictions about the coming year in real estate and while nobody has a crystal ball, we can take this information and make informed decisions about when is the best time for YOU to buy or sell.
Now, on the topic many buyers are concerned about - mortgage rates. In 2022, we saw a rapid increase in mortgage rates as the Fed attempted to slow growing inflation. A higher interest rate can quickly price a buyer out of their initial price range, so these rate increases (along with uncertainty of the market and economy) attributed to much of the slow-down in home sales over the last six months. Many experts are predicting that mortgage rates will start to come down in 2023. When the rates do come down, we expect to see large influxes of buyers competing for homes for sale. Whether you are a first time home buyer, your family has outgrown your current home & you desperately need more space or you are possibly relocating for work or another reason, there are many reasons you may need to buy while rates are higher. As they say “Marry the house, date the mortgage rate.” If you can afford the mortgage for the time being, purchasing now when there is less competition and refinancing when the rates come down is always an option. There are also different mortgage options that may be of interest to current buyers - included a rate buy-down (where you pay upfront to lower the interest rate for a period of time) or an adjustable rate mortgage. Many adjustable rate mortgages are a set rate for 2, 5 or even 7 years. If you look into adjustable rate mortgages, it may be important to make sure you can refinance with no penalties. One of our mortgage partners would be happy to discuss these lesser known financing options with you if you are looking to purchase in 2023. Speaking with a lender is always a great place to start - they can let you know the price range you can afford to get a mortgage on so that you don’t waste any time looking outside of that range.
“Marry the house, date the mortgage rate.”
Rent prices throughout the country are expected to rise another 5% in 2023, following a 7% increase in 2022. As you know, we are currently living in highly inflationary times. What you may not know is that real estate is one of the best hedges against inflation there is. Owning a home can protect you against volatile rent increases and you can be building equity in your home while it increases in worth over future years. Your home is typically one of the biggest and best investments people make. Keeping your cost of living stable while inflation affects grocery or gas prices is a great way to keep control of your finances.
Sources: National Association of Realtors and Buffini & Company
