A large residential area with many houses on a winter afternoon
The year is quickly ticking down, and we are fast approaching the transition between autumn and winter. That makes now a perfect time to forecast how the real estate market might shake out next season and into early 2023.
Will mortgage rates continue to escalate? Is the slow but steady drop in home prices expected to persist? Is a housing market crash likely? We reached out to several experts to get their housing market predictions for early 2023.
Recent housing market updates: Home prices and market trends
Overall, the housing market is in a clear downturn. Home prices peaked nationally in June 2022, when the S&P Case-Shiller U.S. National Home Price Index reached over 318 points and the National Association of Realtors' median existing-home price for all housing types reached a new high of $416,000. The index dropped to around 303 points as of August (the most recent listing), and median existing-home sale prices have since dropped to $379,100.
A major reason is the steady climb in mortgage interest rates, fueled in part by the Federal Reserve's decision to raise rates multiple times across 2022. At its November meeting, the Fed increased interest rates for the sixth straight time. It has been aggressively spiking rates in an effort to curb inflation, and the real estate market has suffered accordingly. Rising mortgage rates equate to less interest from home buyers and greater pressure on sellers to reduce their prices.
We are seeing fewer transactions and increasing days on the market, indicating a price gap between buyers and sellers. As interest rates rise, buyers are deterred from the housing market and mortgage applications are extremely low. History tells us that this is temporary: People are losing their jobs while still carrying mortgages at variable rates. This will force them to return to reality and adjust at lower prices.
Predictions for the housing market and inventory this winter
Despite the current market's relatively interesting inventory levels, there are still houses out there for those looking to buy — if you're willing to navigate the wild rate and price fluctuations. Here's how some industry insights predictions for the winter season to play out.
Housing prices will continue to decelerate. We are in for a bumpy ride in housing over the next 12 months, but we shouldn't expect it to look anything like 2008 to 2009. This looks to be more of a reversion to the mean from a period of lofty house price appreciation. We could see a 3 to 8 percent decline in home prices over the next 12 months.
We are beginning to see the pendulum move away from sellers. Interest rates are going to continue to go up, but buyers are going to have more power to flex with regard to pricing. There are predictions that sales will continue to slow and prices will continue to go down as sellers see their home sit on the market for longer than they have for several years.
Will there be a housing market crash?
Don't expect a housing bubble or market crash anytime soon, including over this coming winter. For one thing, conditions now are not like what happened in 2008, when the housing market tanked. A lot of regulations were put into place following the Great Recession, which led to better loans being written. This is completely different from what we saw in the subprime mortgage era.
To confirm there will not be a housing market crash or bubble in 2022 or 2023. The borrowers eligible for mortgages today are well-qualified and have strong incoming credit. All the other underlying fundamentals, like demand for housing and the cost of new construction, will also support home prices
Borrowers are still more likely to pay off their mortgage
Fortunately, since the housing market crash of 2008, consumers are more aware of the risks involved with mortgages and homeownership. Buyers today are less likely to purchase a home they are unable to afford. The job market also remains strong, suggesting that most buyers and existing homeowners should be able to make their mortgage payments.
Should I buy a house now or wait?
Whether you should buy a home now or postpone the purchase will depend on many factors, including the relative affordability of both the home itself and the mortgage loan. Some experts recommend waiting it out until things become more affordable. But there's always the risk that, even if home prices decrease, mortgage rates will continue to rise in the coming months. If you are seeking to purchase but have a home to sell first, give me a call and we can go over your options when it comes to buying a home.
No comments:
Post a Comment