Are you thinking of making a home purchase in the upcoming months? Deciding whether to buy or wait depends on your situation, needs, and motivation. But there is not a whole lot of good news for the housing market in 2023, with not-so-positive predictions. The economy is expected to continue its uncertainty, with inflation, geopolitical issues, high-interest rates, and more. This will certainly have an influence on the housing market.
After a roller coaster recent run, the housing market is set for a big change in 2023. We certainly won’t be seeing the low mortgage rates and bidding wars of the recent past that the pandemic inspired. Some predict this coming year will bring the slowest housing market in over a decade, with home sales declining double digits due to affordability issues, elevated pricing, and the cost of borrowing money. Some experts even predict the housing market will sink to a 12-year low.
Now for the good news about the upcoming year. There is still a limited housing supply, which will likely prevent prices from hitting rock bottom. Also, homeowners will not really need to worry about underwater mortgages. In many cases, mortgage rates are locked in at lower rates than the estimated 6 percent average rate for next year. This is an improvement from the 7 percent range that we saw in September. In the upcoming year, builders will likely lean toward constructing new multi-family buildings rather than focusing on single-family homes like in recent years.
If we look back a few years, lenders began handing out loans in the early 2000s to those who may not historically have even qualified, causing home prices and homebuilding to soar. The housing market entered correction levels in 2006, followed by a foreclosure crisis due to forced selling and home prices falling significantly between 2007 and 2012. The market began a recovery shortly after.
Overall, the general expectation is that new home prices in 2023 will likely be down around 10 percent. However, if the country enters a recession as many predict, home prices could drop even lower. Some experts are predicting over the next few years home prices could even decline 20 percent. Also, tighter underwriting is expected in the coming months with less credit being available and not much low refinancing. Buying or selling in the upcoming year is a decision to consider carefully.
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