For anyone considering buying or selling a home in the near future, there is one question that tops the list: what is the housing market going to look like this year?
While we definitely don’t have a crystal ball, we do have years of real estate experience to help us make our best housing market predictions on what could happen, both with the technical (mortgage rates and home prices) and the emotional (how people feel about buying and selling right now) parts of a real estate transaction.
Read on to hear our top 3 predictions that we have for the real estate market in 2023.
Prediction 1: Demand is coming back.
Our first housing market prediction is that annual trends will stay put. Spring market is notably one of the busiest times of year for real estate, and we don’t expect that to change this year, even despite the economic changes and a pretty significant slowdown in the market up until this point.
Don’t let the word “spring” fool you, though — the real estate busy season can start as early as February. This is typically the best time to sell your home because it’s also the time of year when house hunters are most active. As the shellshock of high-interest rates subsides, buyers will come back into the market. This new crop of buyers will attract new sellers, filling out the housing inventory, which has been one of the biggest issues in the housing market lately. Many of these sellers will also buy, creating the thriving Spring market we all know and love. So don’t dismiss a crazy Spring and decide not to buy or sell — we think the season will be on fire as per usual.
Another reason demand may rise and people are considering becoming homeowners for the first time, even in this housing market, is rising rent prices nation-wide. Chicago’s rent growth outpaced the national rate several times over, according to the latest monthly report from Realtor.com. Low supply allowed rent prices to skyrocket, and many renters stayed put instead of looking for a new place to live.
For those in a position to, making the decision to own instead of rent could be a better long-term financial outcome, despite higher interest rates.
Prediction 2: People will get more comfortable with current interest rates.
Our second prediction ties perfectly in with our first. Why will the Spring market still be so hot? Because people are adjusting to a new normal of mortgage rates, at least for now. Life goes on despite what the mortgage interest rates are, and more and more people are accepting them for what they are right now.
Rising interest rates have been the focal point of the real estate market for a while now. And while it’s true that the days of the 3% and 2% interest rates are gone, luckily, so are the 7% numbers we saw toward the end of 2022. Mortgage rates were on an upward trajectory throughout most of 2022 due to the Federal Reserve attempting to stifle inflation. In November and December, however, things settled down as we saw that inflation likely hit its peak (source: CNN).
As of mid-January, the average 30-year fixed mortgage rate fell to 6.63%, from 6.81% a week prior as efforts to curb inflation seem to be working. And according to U.S. News, “Nadia Evangelou, the director of forecasting at the National Association of Realtors, says rates will stabilize below 6% in the spring and summer.”
Today’s housing market may not get all the way back to pre-pandemic levels, but rising mortgage rates may stop being a roadblock to buying your new home.
As time goes on, we think the shell shock of the number ‘6’ will fade and the housing market will get back to business as usual when it comes to buying or selling their homes.
Prediction 3: People will be more open to buying, then refinancing.
If you’ve spoken to any real estate agents recently, you’ve most likely heard the term “marry the house, date the rate.” This is a clever way of saying that you should, to a certain extent, disregard the interest rate you have now because you can always refinance your mortgage later when interest rates inevitably go back down. You can’t, however, get back your dream home if someone else buys it.
While cheesy, we predict that this will become more and more common as the year goes on. People that may have been skeptical of this strategy may see others doing the same over the course of the next year and buy into this philosophy a little bit more.
One thing we can’t ignore, however, is rising home prices across the country. We will point out that Chicago was a city impacted the least by house prices hitting the roof, relatively speaking, compared to similar cities like San Francisco or Seattle. This is certainly playing a factor in people’s decisions about buying, but experts don’t expect the home price growth to continue on the trajectory that it has by any means.
In Conclusion…
While we can’t (and won’t) say anything is certain, real estate markets tend to follow trends, and we’re feeling confident in our market predictions heading into 2023. Are the days of 4.5% mortgage rates ahead of us? We think it’s likely…but only time will tell.
Think our market predictions are correct? Want to talk to a real estate expert about the current market and what that might mean for you as a buyer or seller? Click here to reach out to one of our talented agents.
