What Will Control the Real Estate Market in 2023

You may be thing about buying or selling your home, or investing your hard earned cash into a rental, but, is now the time?

No one has a crystal ball, but there are some important indicators to watch out for.

One Key factor that will impact the 2023 housing market is inflation. With the federal reserve's efforts to halt inflation, mortgage rates have been on the rise. Last year alone we saw them double. That’s right, I said double. In January 2022 we were looking at a 3.22 rate, whereas as of the end of December we were at a 6.42% average 30-year fixed mortgage rate according to KCM. Why does that matter? Well, as a buyer, an interest rate jump like that can cost your affordability on a home to drop substantially. You can use a mortgage rate calculator to get a ballpark of just how much the interest rate can affect you (https://www.mortgage-calculator.org/ ). For example, a 400k home with a 3.22% interest rate would cost you $1,670.73, while the same price home, with the same mortgage calculations variables (down payment, home insurance, PMI) would cost $2289.14 at the 6.42 rate. That’s a 618 dollar difference each month, which adds up.

Now, keep in mind today’s interest rates are not historically high. https://www.macrotrends.net/2015/fed-funds-rate-historical-chart has a chart where you can see the range, but the rates have even been up to the early 20s. Does the current rate mean now is bad time to buy? Not necessarily. That really depends on your individual variables and goals. However, does it decrease a buyers purchase capability? Certainly. That in turn effects the seller’s potential buyer pool. You can see the cycle from there. The buying power also influences the home values (supply= demand). If there are less buyers in a purchase range, it can cause home prices to fluctuate to match the amount of demand.

So what direction are mortgage rates going to go? Well, that depends on inflation getting under control. If inflation begins to subside mortgage rates are likely to fall with it.

The current market home values are also going to substantially impact both buyers and sellers. We have seen them on the rise the past few years, but the market has shown signs of slowing. When you compare reliable sources such as Realtor.com and Zelman, their 2023 forecasts range from a pretty substantial increase to a substantial decrease. The average of these estimates land somewhere around….(drumroll please)- little change. Which forecast it shall choose to follow, we have yet to see.

If you want to buy or sell this year, there are several things to do to take market variables into account and make out with a great deal still. On the buying side, you can use seller concessions and loan programs to get the home you want and keep the monthly payments down. As a seller, consider those concessions for buyers willing to pay the price you want- make sure your agent is properly marketing your home and that you have it in the right range for buyer interest.

Side Note: If you need an agent, feel free to reach out, we can connect you with an expert in your area that can help you navigate the market and get the job done right.

Here's to a happy home shift to you in 2023!