Last week, we looked back at some of our favorite blog posts of 2022. If you're interested in finding resources for home buyers, homeowners, renters, and more, visit Our Top 9 Blog Posts of 2022.
This week, we're looking forward into 2023 as we recap a few housing market experts' predictions for the coming year.
1. Mortgage Rates will Decline
Compared to the historically low interest rates that were available early in the COVID-19 pandemic, the slight decline in mortgage interest rates that is predicted for 2023 may not seem all that positive. However, as NextAdvisor points out, interest rates between 6% and 7% are considered average when looking at rates throughout history.
Why does it matter where the mortgage interest rates are? As Redfin explains, lower interest rates save home buyers money on their monthly mortgage payments, making home buying more affordable. Although we wish those 2% to 3% interest rates would return, Redfin predicts that interest rates will drop to below 6% by the end of 2023.
2. Home Sales May also go down, But Home Prices will Level Out
The bad news? Redfin expects that home sales will drop to their lowest levels since 2011, dropping 16% from 2022 to 2023. They reason that many interested home buyers will be putting their home buying journey on pause due to the affordability challenges presented by inflation, high home prices, and a potential recession.
And now, here's the good news. The lack of demand caused by buyer hesitancy means that, according to Realtor.com, buyers who do move forward will no longer face the hyper-competitive market of the past several years. Not only that, but Redfin forecasts that median home prices in the U.S. will drop by 4%, which will be the first annual drop since 2012.
A small drop in the price of housing benefits first-time home buyers, but as Redfin points out, it also benefits current homeowners. Because home prices will remain elevated above pre-pandemic levels, it gives homeowners time to build equity and avoid foreclosures.
3. Rental Prices will Normalize, With some exceptions
If you're currently renting or have plans to, you'll be glad to hear there may be a decline in rental prices this year. Redfin suggests that this financial relief for renters will partly be caused by an increasing supply of rental units and thus a drop in demand.
However, proceed with caution -- Realtor.com predicts that rents will continue to rise in major metropolitan areas, where housing demand remains high.
4. Rental Unit Availability will Increase
As mentioned above, the number of available rental units will increase in 2023 as housing developers race to meet the demand for housing. In fact, construction of multifamily housing was at a 50-year high last year, meaning that new rental units should be arriving soon.
But it isn't just an increase in multifamily construction that will increase vacancy rates -- Redfin predicts that more homeowners may rent out their homes instead of selling when they need to move out. This may hold especially true for homeowners who purchased their home within the past few years, when mortgage interest rates were at historic lows.
On the House blog posts are meant to provide general information on various housing-related issues, research and programs. We are not liable for any errors or inaccuracies in the information provided by blog sources. Furthermore, this blog is not legal advice and should not be used as a substitute for legal advice from a licensed professional attorney.