The housing market in the last 18 months has been brutal for buyers. We experienced that six months ago when our family relocated cross country for a job. As a result, we had to give up our 3.35 percent mortgage and take on a 5.375 percent mortgage for our new house, which seems like a bargain now as rates have continued to climb over the last few months.
Unfortunately, we also had to compete with other buyers and lost out on several houses because we wouldn’t go over the asking price. Thankfully, the housing market has begun to shift and now buyers are in charge, or will be soon, in many areas of the country.
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Factors Affecting The Housing Market
The housing market shift will be affected by several different factors:
Whether the U.S. Enters a Recession
If the United States enters a recession, housing prices will likely tumble. However, if that happens, there will also be fewer buyers. Yet, for the buyers who retain their financial stability, a recession can mark an excellent time to buy a home at a lower price than we’ve seen in a few years.
If Inflation Continues to Ease
If inflation continues to ease, the Federal Reserve won’t need to increase interest rates as aggressively, which is good news for potential buyers. As interest rates have increased over the last year, more and more potential buyers have been pushed out of the market. An easing of rising interest rates will keep more buyers in the market
What to Expect in 2023
Generally, here’s what you can expect in the housing market in 2023:
Lower Home Prices
Home prices are expected to fall this year rather than continue their meteoric rise. According to U.S. News, “Existing home prices in 2023 are predicted to fall about 5% nationally.” Of course, that percentage could increase if we enter a deep recession; however, that doesn’t seem likely at this time. However, the days of paying over the price are hopefully over.
Mortgage Rates Won’t Decrease Dramatically
Unfortunately, for recent buyers like my husband and me, mortgage rates aren’t likely to decline significantly in 2023. However, that should not deter you from buying a house if you can afford it.
I have heard people repeatedly use the phrase, “Marry the house; date the mortgage,” meaning buy the home you love and can afford. The house is more permanent; you can always remortgage later at a lower interest rate, which is exactly what my husband and I plan to do.
Final Thoughts
The housing market remains tight, but there are increasing signs that a housing market shift has begun. Hopefully, by 2024, the market will self-correct. Meanwhile, this year looks like a better year than 2022 to buy a house, especially if you can afford one with the current high mortgage rates and can wait patiently for the rates to come down so you can refinance.
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