The years following the pandemic have seen volatile changes for the housing market—as home buyers and sellers enter 2023, experts are predicting a mixed bag.
Key Details
- Buyers can likely expect a greater inventory of homes to choose from this year, but that inventory will come from homes taking longer to sell than last year.
- Home prices are expected to remain high, leading to fewer sales overall. Overall home sales are predicted to fall 14% compared to last year, according to Realtor.com economist Danielle Hale.
- Fewer buyers making purchases could also continue the rental inventory shortage as more potential buyers become renters instead.
- Experts predict that the median rental prices will rise 6.3% over the next year.
- Rising inflation will also likely continue to plague homeowners.
Why it’s news
Housing affordability has been a growing concern across the U.S. since the pandemic resulted in a housing-market boom. While bidding wars where buyers scramble to buy houses—sometimes waiving inspections and paying thousands over the asking price—are less common, buyers still have a hard time entering the market.
Homes are selling at a slower pace, allowing buyers to take their time with a purchase. Sellers are even beginning to offer more incentives to encourage quick purchases from buyers.
Even with the shifts in the housing market, high mortgage rates made it difficult for buyers to make a purchase last year and will likely continue to do so.
Though mortgage rates remain high, a recent drop in rates sent homeowners scrambling to refinancing offices. Last week, the average interest rate dropped from 6.58% to 6.42%. In 2020 the average mortgage interest rate was 3.11%.
Although this decline in rates resulted in a 5% increase in refinancing applications, the total number of homeowners requesting this service was 86% lower than at the same time last year.
Though the slowing housing market could eventually lead to rental inventory shortages, the current rental market is improving from rates last year. Rent prices grew significantly last year. However, as fewer renters were able to afford high prices, they have begun to trend downward again.
This cooling of rental prices is expected to continue into this year, in part because economic uncertainty has led to more renters preferring to stay where they are rather than risk moving, Barron’s reports.
