These are my five predictions for the future of the housing market.
Are you wondering if there will be a bursting bubble in 2023? Are you wondering what will happen with mortgage rates? Most people in today’s market are thinking about these questions and much more, so you’re not alone. To help you have an idea of what you might expect for the future of our housing market, here are my five educated predictions:
1. There will be no bubble to burst. Mortgage rates have skyrocketed in the past year, and there has been a massive increase in home prices. These things have led many people to believe we are back in 2008 when the market crashed. However, nothing could be further from the truth. The big difference between now and 2008 is inventory levels. Back in 2008, the market was flooded with homes for sale, whereas currently there is still a very low number of homes for sale. This will keep the balance of supply and demand.
2. Mortgage rates will drop. Ultimately, I believe that the Fed will pull back on its aggressive stance, which will allow rates to stabilize. Mortgage rates are currently around 6%, but projections show these rates could be around 5% in 2023. Yes, this is still significantly higher than what we have been used to over the past few years, but it’s still 2% lower than the long-term average.
3. Inventory levels won’t grow significantly. Inventory has been low for several years now and I don’t believe that will change. This is largely because owners don’t want to lose their historically low mortgage rates. 14.3 million people purchased a home in the past two years, so they have an incredibly low interest rate on their loans. In addition, 15 million homeowners refinanced their loans in that same time frame. Homes will still sell for normal reasons, but the huge pool of casual sellers won’t exist.
4. Sellers will need to be more realistic. Homeowners had the upper hand for several years, with multiple offers and bids consistently being over the asking prices. However, those days are long gone. Lower affordability has caused many buyers to stop the home-buying search. Therefore, with fewer buyers, sellers need to be more competitive. They cannot price their homes based on what their neighbor’s home sold for eight months ago.
5. There will be fewer new-construction options for buyers. Permits for new-construction homes are down 17% year-over-year. Builders will see some ease with supply chain issues, but the development cost will still be high. Trying to balance what it costs to build a home and what a consumer can pay will likely lead builders to slow activity even further.
These are my educated predictions for 2023. If you have any questions, don’t hesitate to reach out—I would love to hear from you! Call or email me anytime.
