The housing market has been anything but predictable these last few years. With 2021 bringing low-interest rates and extremely high demand and 2022 raising rates to slow things down, what can we expect from the 2023 housing market? The end of 2022’s market is a good indicator of things to come, with home sales slowing and houses priced too high sitting on the market for longer than usual. With interest rates high and home prices even higher, things are expected to shift to make way for first-time homebuyers to finally have an opportunity to put their hat in the ring and buy a home. Rental market activity may also push more people to buy a home as rent price increases outpace homes. Here is everything you can expect in the 2023 housing market:

Slower Home Sales

According to the National Association of Realtors, home sales are expected to decline by 7% in 2023. Much of this can be attributed to the fact that over 85% of homeowners currently pay mortgage rates below 5%, giving little motivation to move when interest rates are so high. In line with what we are seeing at the end of 2022, many homes will spend more time on the market as buyers struggle with affordability and home prices remain high. Luckily, the national median home price is only projected to increase by about 1%, which should help more people feel comfortable about considering buying a home in 2023.

Expect more home sales toward the end of 2023, as interest rates are predicted to lower again to 5-6%, making those homeowners who were holding onto their low-interest rates keener on selling their homes and moving somewhere new.

Buyers’ Market

While 2023 won’t be overwhelmingly a buyers’ market by any means, we will finally see a shift away from a market that has been tough for buyers for years. As price increases begin to even out and homes sit on the market longer than usual, many homebuyers will be positioned to buy a house they can afford. Expect the first-time homebuyer market to increase in 2023 as rent prices continue to climb. If you are looking to buy in 2023, try to get in before Spring when interest rates are expected to drop, which will cause prices to rise again through the rest of the peak moving season.

New construction may also play a part in this buyers’ market as more options become available, driving down the competition and, in turn, lower prices. High demand in 2021 resulted in the need for new condos, homes, and apartment buildings, and as these projects continue to complete, more supply means more competitive pricing for buyers to get in at an affordable price.

Higher Rent Prices

Due to the record high home prices of 2021 and 2022, many people have opted to rent instead of buying homes. This has driven up the rental market and resulted in higher prices for anyone looking to rent, especially in 2023. Across the US, the median rental price is predicted to increase by 6.3%, significantly higher than what we are seeing for home prices. Renters in large cities will be the most impacted by this increase and may be pushed to consider purchasing a home or moving out of the city to cut costs. This push away from the rental market as prices of homes begin to even out could result in many millennials and Gen Z beginning their home-buying journey and driving more competition in the housing market.

Key Takeaways for Buyers in 2023

Although interest rates will remain high in early 2023, do not hold off on a good home hoping for rates to come down. The beginning of 2023 will be the best time to find a house at a good price while the market slows and sellers reduce their prices to adjust to the change in demand. If you want to get into the market at its lowest, you should find a good realtor at the start of 2023 and start looking while things are still moving in the buyers’ direction. By spring of 2023, we could see lower interest rates begin to push prices higher again, so getting in now is your best bet for an affordable home.

If you are considering buying a home in 2023, the best place to start is finding an expert to help you navigate. Give me a call or fill out the contact form on my website so we can get started!