With 2022 rapidly coming to a close, many prospective home buyers are asking the question “Will we see a drop in housing prices in 2023?” Depending on the sources you research, the 2023 forecast is a mixed bag. The current predictions call for higher borrowing rates, less buyer demand, and lower prices. Interest rate increases coupled with a home inventory shortage has pushed prospective home buyers to the sidelines.
Prospects for Home Buyers in 2023
While we expect to see some decrease in housing prices, it is unlikely to be as drastic as it was when the housing market crashed in 2008 (due to dramatically improved underwriting standards over the last 12+ years). Some continue to believe that the market will continue to maintain value, particularly if inflationary factors continue to abide in the rest of the economy.
However, if inflation persists, we could see the Fed tightening up more than what was once anticipated by our financial markets. Conversely, if inflation backs off or we see a recession developing during 2023, the Fed might soften up financial conditions. In any event, homeowners and renters as well as buyers and sellers might not be impressed with 2023. Furthermore, as mortgage rates rose steadily throughout 2022, home sales slowed down significantly, especially as homes for sale are well below historic averages.
This led to decreasing home prices and the balance of the housing market moving away from sellers. Unfortunately, a slowdown in housing price increases won’t transform the housing market into a buyer’s market because of increasing mortgage rates. Home buyers should benefit from an increase in homes for sale, but housing costs will remain relatively, thereby limiting affordability and tightening budgets. Consequently, if buyer’s and seller’s expectations are unreasonable, 2023 could wind up being a stalemate.
The state of the economy tells us that inflation and mortgage rates have impacted the market during the past year. You saw housing values skyrocket while interest rates fell to historical lows. Since March of last year, interest rates have climbed to nearly 7% while property values are up nearly 40%. In today’s housing market, this type of growth is unsustainable, and are return closer to historic, low digit increases, after a correction.
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On a closing note, Millennials are expected to continue being the driving force in the housing market. At the same time, you are likely to see an increase in first-time home buyers and older Millennials. Our team of experts are available to assist you find the best interest rates and we’ll walk you through the whole process to make it easy for you.
Call us at (303) 500-1900 for a painless, 4-minute conversation to see how we can help you get into your next place!