The last few years have been tough for home buyers with the pandemic leading to extreme competition and high prices. However, 2023 could mark a turning point for the housing market, with a number of trends pointing to a brighter outlook for buyers.
According to Danielle Hale, Chief Economist for Realtor.com, there will be more homes for sale in 2023, and they will likely take longer to sell. This means that buyers will not face the same level of competition that has been commonplace in recent years.
Matthew Speakman, Senior Economist for Zillow, also notes that negotiating power is shifting from sellers to buyers, meaning that buyers don’t have to settle for the first house they can win a bid on and can use inspection and finance contingencies.
However, Lisa Sturtevant, Chief Economist for Bright MLS, cautions that even though buyers may have more negotiating power than in 2021, it is still very much a seller’s market. It is therefore vital for buyers to secure mortgage preapprovals before making offers. One area where buyers may find deals is with newly constructed homes, as builders may reduce prices or offer incentives such as rate buydowns. This is due to the fact that builders faced a growing number of cancellations in 2022 as mortgage rates rose while houses were under construction.
Mortgage rates could also provide some good news for buyers in 2023. Fannie Mae, Freddie Mac, and the National Association of Realtors all forecast a gradual decline in mortgage rates, with the 30-year mortgage averaging between 6.1% and 6.5% in the fourth quarter of the year. The Mortgage Bankers Association even predicts a more abrupt decline, with the 30-year mortgage averaging 5.2% in the fourth quarter. These predictions should be taken with a grain of salt, however, as forecasters were off the mark in their predictions for 2022.
It is more difficult to predict what will happen to home prices in 2023, as they vary significantly depending on location and season. Forecasts for the national median home price range from a 5.4% increase according to Realtor.com, to a 2.5% increase according to the National Association of Realtors, to no change or even a slight decline according to other sources.
One factor that could impact home prices is the amount of new construction in the market. While new construction was down in 2022, it is expected to pick up in 2023, which could help to increase the supply of homes and put downward pressure on prices.
Overall, 2023 looks to be a better year for home buyers than the past few years, with less competition, potentially lower mortgage rates, and a mixed outlook for home prices. It is important for buyers to do their research and be prepared, but there may be more opportunities for them in the coming year.
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