The 2020-2022 housing market brought plenty of surprises to home sellers, buyers, banks, and investors. With demand for affordable housing at an all-time high, what does the future hold for the real estate 2023 market? Low mortgage rates and increasing demand are fueling more homeowners to sell. Homebuyers are looking to get into a new home away from major cities with loans at a great rate. Let’s take a closer look at some of the current real estate trends and what they might mean for 2023.
Home Sales: The Numbers
The jump in home sales grew significantly in 2020, actually surpassing the number of homes sold in 2007. Buyers are ready to commit to owning a home, whether they’re first-time homeowners or simply looking to make a profit on their current home while getting in on a great rate in a new location. Demand for housing is extremely high, and Realtors expect sales and profits to continue to skyrocket through the remainder of 2021. However, despite these high numbers, some predict that the trends will start to slow down, resulting in a downtick in new home sales for 2022. Pending home sales were down 2.3% as of September of 2021, which may indicate that there will be a downturn in sales for the coming year.
Will the Market Crash?
While no crystal ball can accurately predict the outcome of new home sales for 2023, the numbers will likely dwindle based on current data. And while rates continue to remain low, the odds are likely that they’ll increase in the coming months or year ahead. Overall, the U.S. housing market tends to stay in line with the rest of the economy. As new home prices soar, many buyers are simply priced out of the market, particularly during periods of inflation. Eventually, sellers will need to lower their asking prices, and banks will likely begin to raise mortgage interest rates slowly. It might not result in a total crash, but these two factors may help to slow things down significantly over the coming year.
One in every three home buyers relocated in the first three months of 2021 due to the pandemic. As new information and understanding about the virus develop along with effective vaccines, some buyers will probably either remain in place or eventually move for different reasons. The slowdown in urgency to relocate is likely to impact various aspects regarding real estate, including prices, rates, and general demand. On the other hand, real estate listing site Zillow’s recent forecast for 2022 predicts that prices (home values) will actually rise. In fact, they believe that home values will increase rather significantly, coming in at approximately 13.6% higher overall between October 2021 and October 2022.
What the Future Holds
Based on current trends, it’s likely that the real estate market will continue to see a rise in home values but a potentially lower level of demand. Higher inflation rates, a tough job market, and overall uncertainty can make it difficult for many buyers to commit. The bulk of mortgage forbearance programs have ended, which also plays a major role in how the market behaves. These programs can impact housing inventory fairly significantly and cause a reduction in affordable properties. An increase in the price of building materials and a lack of skilled workers has decreased the volume of new construction. On the other hand, the number of Millennials looking to purchase a home is growing, so there’s still a possibility that the 2023 market will remain strong.
Historically low-interest mortgage rates and historically high demand for housing coupled with the pandemic has caused the 2020 and 2022 housing market to thrive. With these two significant factors in mind, real estate trends will likely continue to surprise us all in 2023.