The world of real estate has had a tremendous couple of years. From record-breaking home prices to fierce competition and historically low interest rates, the market's been hot. But as 2022 comes to an end, economists and other experts are warning that a lot is slated to change next year. Don't get caught by surprise: read up on the latest housing market expectations for 2023. You'll need to prepare yourself — and your clients — for what's to come.
What to Expect from Real Estate in 2023?
No one can predict the future, but there's an abundance of data sets to help experts pick up on trends.
1. The Housing Market Cools
One thing seems clear: the 2023 housing market won't be as hot as it was in 2020 and 2021. At least not for the first half (winter and spring) of the year.
Finance giant Freddie Mac predicts a total of 5 million units will be sold this upcoming year. Compared to 2021, when 7 million units were sold, that's a 30% drop in real estate sales. The volume of home purchase mortgage originations is also set to decrease from $2 trillion in 2021 to $1.6 trillion in 2023.
2. Fewer Qualified Buyers
Banks are placing stricter requirements on lending. As a result, prospective buyers have a harder time qualifying for a mortgage. Real estate agents can expect fewer qualified buyers to enter the market in 2023 and a more complex lending approval process.
3. Housing Inventory Predicted to Go Up
One piece of good news is that housing stock is likely to go up. As contractors have prioritized building multi-family homes over single-family ones, more units are on the way. Agents should understand the ins and outs of buying a new build so they can help their clients.
Unfortunately, housing stock over 2023 will still be too limited to meet demand. That's in part due to post-pandemic supply chain disruptions and to homeowners deciding to stay put for longer, while they're still locked into lower mortgage interest rates.
4. Home Prices Forecasted to Drop
Home prices will likely fall in 2023 for the first time since 2012. Experts estimate a 4% price drop nationwide by the fourth quarter of 2023. Some areas of the country that saw skyrocketing appraisals in 2020 will likely plummet in value the most. Financial institutions predict markets in Boise, Phoenix, Las Vegas, and Dallas could decline by around 20% in 2023.
5. Interest Rates Could Come Down
Interest rates reached a recent high of 7% in November 2022, but economists predict they'll go down throughout 2023. The American economy seems poised for a slow but steady recovery. Current predictions have mortgage interest rates dropping to between 5.5% and 6% by the end of the year.
6. A Swing Towards a Buyer's Market
Whereas 2020 through 2022 was a seller's market, 2023 seems poised to become a buyer's market. Home prices are coming down, competition isn't as fierce, and new builds are entering the market. Overall, buyers will likely have greater leverage over sales than in the past couple of years.
Agents can expect fewer bidding wars, no inspection waivers, and more time with clients before making an offer on a property. Now is the time for real estate agents across the country to perfect their skills so their clients can reap the benefits of a buyer's market.
Working in Real Estate Is Still Well Worth It
Although the housing market won't be as hot in 2023 as it was right after the pandemic hit, there are still plenty of reasons to dive into real estate. Namely, flexible schedules, remote opportunities, and helping clients finally buy their dream homes. Whether you need to get a real estate license in your state or continue your education to stand out from the competition, Aceable is here for you.
Updated 12/14/22