Current housing market trends can create challenges and opportunities for those considering selling their home. Read on to learn more.
Whether you recently moved, are looking for the best time of year to sell a house, or have no intention of buying or selling, there’s a good chance you’ve been keeping up with the current real estate market. After all, considering recent record-high home sale prices and ever-fluctuating interest rates, real estate industry chatter also seems to be at an all-time high.
But most of what we hear on a daily basis is exactly that: chatter. So, to cut through some of the static, we’ve outlined everything you need to know about the 2023 real estate market –– from real estate market trends and the factors contributing to these changes to the ways homeowners may be impacted.
Before we dive into what homeowners can expect out of the 2023 real estate market, let’s take a closer look at the conditions of the day.
Homeowners may still see a higher sale price for their home today than what they may have gotten six to eight years ago, but the post-coronavirus spending spree looks to have come to an end. Compared to February of last year, U.S. home prices were down 1.2% on average. This average, according to Redfin, brings the median sale price to $386,721 compared to February 2022’s $391,313.1 Homeowners won’t likely feel this slight decrease when it comes time to close, but it is a stark contrast to the highs of this past summer –– where we saw averages cresting $430,000.
So, how will interest rates affect the housing market? These reduced sale prices, of course, are largely attributed to the higher interest rates affecting the housing and real estate industry. According to information gathered by Nerdwallet, interest rates have been on a largely upward trend since August of this past year, when 30-year fixed mortgage rates sat at just below 5%.2 As of March 2023, however, Bankrate has seen rates as high as 7.13%, marking a two-point jump in the past five months.3 15-year fixed rate mortgages and 5-year adjustable rate mortgages (ARMs) have also climbed during the period, though not quite as high.
Looking at elevated interest rates and the number of available homes countrywide, the reasoning behind the year-over-year dip in home sales prices begins to come into focus. From February 2022 to February 2023, U.S. housing inventory climbed to 980,000 from 850,000.4 With housing supply and interest rates both on the rise and demand on the decline (more on that below), lower sale prices are to be expected.
Recent sale prices, interest rates, and available inventory have all influenced homebuyer behaviors –– causing a shift that could send ripples through the entire housing industry. With many would-be buyers being priced out of their chosen neighborhoods or cities, some are putting the home search on pause while others are opting for more inexpensive areas.
Top real estate agents predict as many as 67% of first-time homebuyers will shop in inexpensive areas to make their dollar go further, with 45% compromising in the form of smaller, older homes.5 The impact of this urban exodus might not be felt today, but if these buyer behaviors persist, we can expect cities as we know them to change while entirely new markets emerge.
So, what can buyers and sellers expect the coming months to bring? Here are the top real estate market trends for 2023.
Buyers, we don’t want to get your hopes up too high: We doubt we’ll see a buyer’s market quite like we did a mere two years ago. With that said, some top real estate experts are saying that the rest of the year could usher in a return to a far more buyer-friendly housing market. Multiple factors are responsible for this shift, with the biggest being a decrease in buyer demand as a result of elevated mortgage rates. As demand dips, prices will likely follow.
Rising costs of living may also play a role in this shifting power dynamic, as tighter budgets across the country can also mean reduced buyer demand for real estate. While it remains to be seen whether a full-blown recession will rear its head, we expect many buyers will play it safe for the time being.
For sellers, the remainder of 2023 could bring deflated values –– depending on where you’re trying to sell. Retirement havens and long-standing retreats for the elite like Florida will be more likely to maintain high sale prices than, say, Silicon Valley and its adjacent cities, which have ranked in the top 10 for fastest-cooling American markets.6 Other areas, like Seattle and Denver, may also see a slow-down, meaning sellers in these cities may not be able to net the record-high sale prices they could have this time last year.
Of course, this comes as good news for buyers in these areas, who may no longer be priced out of these otherwise fast-growing markets. However, given that this dip in the real estate market is not expected to be substantial (for now), and the persistently higher interest rates, some buyers may need to hold off for a more significant shift in market conditions.
With home prices still at a relative high and mortgage rates on the climb, stagnation is one of the standout real estate market trends for 2023. While dipping, home prices still haven’t dropped enough for many potential buyers to act.
And even if this dip has been compelling to some, mortgage rates may still be prohibitively high. The result? A not-so-active market. Again, this may vary from place to place, but across the board we’re expecting reduced demand and lower sales numbers until interest rates begin to level off.
As mentioned above, persistently high home prices have forced many buyers to consider markets not previously on their radar. And while these markets may seem ideal due to reduced demand, this shift has also dramatically reduced supply.
Whereas construction in New York City is a constant, with new (expensive) real estate offerings hitting the market each day, places like Buffalo, NY and Hartford, CT –– where new builds are far less prevalent –– have had their inventory virtually reduced to zero. Greensboro, NC has also had its home supply decimated by shifts in demand, with less than half the available real estate the city had at the start of 2019.7
As we’ve mentioned above, some parts of the country will likely be more impacted than others. Below are a few of the most area-dependent real estate market trends for 2023.
While sale prices across the country may be trending (slightly) downward, in-demand markets like Florida, Texas, and North Carolina will likely be immune from this trend. Raleigh, NC, in particular, is currently one of the hottest housing markets, according to information gathered by U.S. News, leading us to believe that buyers in this market may still see relatively high sale prices.8 Considering neighboring Greensboro’s extremely limited inventory, we anticipate home its home prices will also remain on the higher side.
Bidding wars might be far less commonplace, and some of the power may have made it back to buyers’ hands, but the seller’s market from years prior still lingers in many markets across the country.
North Carolina’s Raleigh and Charlotte are seeing high economic growth and activity, creating a more competitive environment –– if not entirely frenzied –– for buyers than those found in slower markets. In 2023, aspiring North Carolina, Florida, and Texas buyers may have their budgets stretched to the limits with over-asking-price bids, not to mention the climbing interest rate.
How does remote work factor into real estate? In more ways than you might think! Mid-pandemic, it became clear to many that work-from-anywhere policies were here to stay (for now,) with many residents of tech and business capitals taking this as their sign to move out of the City and toward affordable housing.
As a result, places like Springfield, MO and Tulsa, OK emerged as some of the top markets for remote work –– allowing workers to stretch their salaries far further than in New York or California. But with some businesses preparing for a return to the office, it’s possible that these markets and others where remote workers have made their homes could begin to slow.
As of yet, we don’t have much hard data to support this developing trend, but we’ll be keeping an eye on key remote work markets as more employees head back into the office.
We know the trends, the reasoning behind the trends, and the ways in which these trends are already impacting the current housing market. But what challenges and opportunities do these trends set before sellers? Below, we take a look at the obstacles these real estate market trends for 2023 have created for homeowners, as well as some opportunities.
In much of the country, home prices appear to be readjusting back to something that resembles “normal,” meaning homeowners who have waited until now to sell can expect a marginally lower sale price than they might have seen during the market’s heyday. Of course, in especially “chilly” markets, these sale prices may dip more than the 1-2% we mentioned earlier. And with every buyer in the country at the mercy of uncertain interest rates, a successful home sale largely boils down to buyer behavior –– which can be as unpredictable as the rates themselves. This presents a significant challenge for motivated sellers, but the fact remains: Given where housing prices still are, patient, persistent, and well-researched sellers can still make a tidy profit.
But while buyer behaviors can hurt some sellers, they may end up being a tremendous benefit to others. See, while buyer behavioral trends emerge each day, what we know now is that consistently high home prices have driven younger buyers into smaller homes in less desirable areas. So, for homeowners in smaller markets (with smaller properties), this shift presents a significant opportunity. If you were considering building an addition to boost your square footage and appeal to more buyers, you might want to hold off –– as your home could be perfect for a young family of first-time homebuyers exactly as it is. And if your distance from a major real estate market has been a hindrance in the past, it might become a perk before you know it.
Whether you’re in the process of listing your home or just exploring your options, understanding the real estate market trends for 2023 is the first step toward getting the most out of your home. For more valuable resources for homeowners, and to explore other ways to maximize your home equity, check out Truehold’s sell and stay transaction.
Sources:
1. Redfin. U.S. Housing Market Overview. https://www.redfin.com/us-housing-market
2. Nerdwallet. Current Mortgage Interest Rates. https://www.nerdwallet.com/article/mortgages/current-interest-rates
3. Bankrate. Compare current mortgage rates for today. https://www.bankrate.com/mortgages/mortgage-rates/
4. Ycharts. US Existing Home Inventory. https://ycharts.com/indicators/us_existing_home_inventory#:~:text=US%20Existing%20Home%20Inventory%20is,15.29%25%20from%20one%20year%20ago.
5. Business Wire. Challenging Real Estate Market Continues Into 1st Quarter of 2023: Retirees and First-Time Homebuyers Among the Highest Impacted. https://www.businesswire.com/news/home/20221206005292/en/Challenging-Real-Estate-Market-Continues-Into-1st-Half-of-2023-Retirees-and-First-Time-Homebuyers-Among-the-Highest-Impacted
6. CNBC. These 10 U.S. real estate markets are cooling the fastest: Here’s what to know if you’re a prospective buyer. https://www.cnbc.com/2022/07/12/us-real-estate-markets-that-are-cooling-the-fastest.html
7. Time. Why There Are No Houses to Buy in Many U.S. Metro Areas. https://time.com/6261427/current-us-housing-market-inventory-low/
8. U.S. News. The Hottest Housing Markets in the U.S. https://realestate.usnews.com/real-estate/housing-market-index/articles/the-hottest-housing-markets-in-the-u-s
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